Such demand shocks can be triggered by structural changes in the behaviour of economic agents or result from portfolio shifts or financial innovations in the context of financial globalisation. There are indeed some signs that a money demand shock occurred at the beginning of the 2000s in the euro area, as illustrated by an apparent structural shift in the trend velocity of money, which summarises the relationship between money, output and the price level. (see Figure Annex page 8). A tentative explanation is that our economies are becoming more and more "financial" in the sense that the ratio of financial wealth to GDP is constantly increasing. Since economic agents – especially financial intermediaries and corporates – need to keep part of their total financial assets in liquid holdings, there may be a structural increase in the demand for money (everything equal). The euro and the integration of European capital markets may have accelerated this evolution. As an illustration of the uncertainties facing euro area monetary policy makers, one possible consequence of current events in credit markets may be to trigger a re-intermediation process, i.e. an expansion of banks' balance sheets which may further complicate our reading and interpretation of monetary and credit dynamics in the months to come. As you can see there is a need to continuously reassess and diversify the tools used in our monetary analysis. 4. Predictability and frequency of policy actions  Contrary to some preconceptions, most monetary policy decisions have been perfectly anticipated by the markets.
I think there is a broad agreement on the fact that interest rate decisions are state-dependent rather than time-dependent and as a consequence, both the frequency and the amplitude of the policy changes are mainly driven by the underlying state of the economy. As far as the Eurosystem is concerned, the more gradualist approach is nothing but the reflection that the economy of the euro area has been less affected by cyclical fluctuations than the US economy. Moreover, recent research carried out by the Eurosystem on inflation persistence tends to show that the degree of inflation persistence in the euro area is quite moderate while the degree of price stickiness is considerable and higher than in the United States. This finding may provide another justification for a gradualist monetary response to cost-push shocks as: first, the impact of an inflation shock will be small as agents anticipate a low persistence of this shock and therefore will maintain their expectations of future inflation at low levels; in turn, the negative response of the output gap will be limited implying a less persistent response of the real rate. 5. As a result, the Eurosystem monetary policy has won European citizens’ confidence in and acceptance of the new currency  Finally, the euro has been readily accepted by economic agents and is now part of European consumers’ daily lives. Surveys confirm that the general public has confidence in the euro, as a solid currency, and in the Eurosystem as their Central Bank.