Third and not least, national reflexes are still present, with countries reasoning vis-à-vis “their” banks and “their” financial centre. The result is that each European country, and the EU as a whole, are losing to the benefit of London and the United States – or to the benefit of foreign Bigtechs tomorrow. All in all we have to accept the idea that instead of a single European financial centre, we will have a polycentric network of financial centres – all the more since the digital era encourages it. And accept that there will be no winner-takes-all country, but several pan-European cross-border financial players. In this early 2022 nevertheless, there are at least four reasons to believe that we can breathe new life into Banking Union and CMU: There is growing awareness that European strategic autonomy matters and that financial sovereignty is part of it. This shift started with the Covid crisis but it is being underlined even more starkly now by geopolitics. The two “great transformations” ahead of us, digital and ecological, will require massive investments. This calls for common financing from not only public but also private sector. We should rebrand the CMU in a way that better reveals its goals: financing our two major transformations. I proposed some time ago to rebrand it “Financing Union for Investment and Innovation”, or “Financing Union for Sustainable Investment” – Christine Lagarde suggested a “Green Capital Markets Union”.
Monetary policy decision Before commenting our decision today, I would like to point out the changes that are shaping our current environment. In December 2005, when the present cycle of interest rate hikes began, we were concerned with the normalisation of the interest rate level – at the time the Libor was at 0.75% – while allowing the economy to reduce its level of unused resources. Our concern now is to ensure that monetary conditions are such that the healthy state of the economy does not jeopardise price stability in the medium term. We are still observing that the competitive pressure in the market is high, the labour market very flexible and that movement in the monetary aggregates is moderate. However, my analysis of the current situation has demonstrated that the inflation outlook has deteriorated in different respects since our last assessment: higher oil prices will have an impact on the consumer price index; economic performance, which is better than expected, will result in an improved utilisation rate and increase pressure on prices and, finally, a renewed weakening of the Swiss franc has neutralised the intended tightening in monetary conditions. Today's decision to raise the target range for the three-month Libor by 25 basis points takes into account this deterioration in the outlook for price stability. Inflation forecast graph I will now turn to the last part of my remarks. What is our inflation forecast?