But before that, let me say a few words about our monetary policy. Our monetary policy is doing its part, thanks to its persistence and patience, as Mario Draghi stressed this morning. Past questions about its effectiveness and our exit strategy seem to have receded – and rightly so. We confirmed last week our course of gradual normalisation, with the removal of the so-called “easing bias” on the APP. What we see now is a welcome alignment of the stars: against the economic background of a robust expansion with gradual progress on inflation, there is a broad convergence of market expectations with the views within our Governing Council. At present, there is very little debate among us. But this convergence doesn’t preclude vigilance. We’re closely watching the somewhat slow pace of inflation – I believe the Phillips curve is still at work, although with a time lag – and the global risks, starting with US trade policy and the evolution of the exchange rate. Let me now turn to the core of my message: the need to strengthen our Monetary Union by making concrete progress on Economic Union. There is currently a window of opportunity: the economic recovery is robust, and many euro area reform proposals point in the same direction, including the Commission roadmap of December 2017, President Macron’s speech at the Sorbonne last September and, more recently, the European chapter of the German coalition agreement. The outcome of the recent elections in Italy shows that we can’t waste any more time with theoretical debates.
See Lipsey, R and Lancaster, K (1956), “The general theory of the second best”, Review of Economic Studies, 24(1). 8  Arrow, K and Debreu, (1954), “Existence of an equilibrium for a competitive economy”, Econometrica, 22 (3). 4  BIS central bankers’ speeches  Then they can trade contracts and insure each other against risks they are unwilling to bear. A moment of introspection reveals the absurdity of these assumptions as a description of the actual world. More often than not, even describing the universe of possible outcomes is beyond the means of the mere mortal, let alone ascribing subjective probabilities to those outcomes. That is genuine uncertainty, as opposed to risk, a distinction made by Frank Knight in the 1920s. 9 And it means that market outcomes reflect individual choices made under a pretence of knowledge. The swings in sentiment that result – pessimism one moment, exuberance the next – don’t reflect nature’s odds, but our own assessments of them, inevitably distorted by Keynesian “animal spirits”. 10 In the end, belief in the second lie that “markets always clear” meant that policymakers didn’t play their proper roles in moderating those tendencies in pursuit of the collective good. Lie III: “Markets are moral” Despite these shortcomings, well-managed markets can be powerful drivers of prosperity. By financing firms to hire, invest and expand, they drive growth. By opening up cross-border trade and investment they create new opportunities for businesses and savers.