So a price-level targeting regime which specifies that prices should grow at x per cent a year ought to lead to fewer instances in which the ZLB on interest rates bites than does an inflation targeting regime with a target rate of x per cent. This proposition is demonstrated formally by Eggertsson and Woodford (2003). It is, though, worth pointing out that there may be times when having a price-level target is likely to be unhelpful. For instance, consider the present case of the United Kingdom, where upward shocks to oil prices and indirect taxes and a substantial depreciation of sterling have led to inflation running consistently above the 2 per cent target, but at a time when the economy has also been subject to an adverse demand shock which has opened up a substantial margin of spare capacity. Price-level targeting would dictate that this excess inflation must subsequently be unwound. Consequently, inflation expectations would be lower and real interest rates higher. That in turn would exacerbate the downward pressure on demand, worsening the constraint of the ZLB. The theoretical superiority of price-level targets over inflation targets hinges on the forwardlooking nature of expectations. If expectations are not forward-looking, then their automatic stabilising feature is lost. And the presence of inertia in the inflation process also reduces the relative superiority of price-level targets. In particular, if a significant fraction of firms set their prices on the basis of past inflation, then it becomes optimal to permit some drift in the pricelevel path in response to shocks.
The achievements of the December agreement must resolutely be built upon: regarding the Banking Union, a common backstop that would be available rapidly and remain in place for a sufficiently long period is an essential element, even more than the deposit insurance scheme, to ensure that the single resolution mechanism is solid and effective. The Capital Markets Union, on which everyone agrees in principle, must finally forge ahead to better channel our EUR 350 billion private savings surplus towards the concrete needs of our economy: digital innovation, the energy transition and SMEs’ capital. Finally, the progress achieved on the public solidarity mechanisms – preventive intervention of the European Stability Mechanism, fiscal capacity – is a promising prospect but it needs to be translated into action. 2 – My second wish is for financial stability 1/3  BIS central bankers' speeches  I would first like to acknowledge the soundness of our financial institutions. In June 2018, the Tier 1 capital ratio of the main French banks stood at 13.5%, i.e. 7.7% higher than in 2008. The liquidity situation has improved, with an average LCR of 127%. The share of non-performing loans has continued to decline to stand at 3.1% in June 2018, i.e. close to the pre-crisis level, compared with a European average of 3.6%. The same holds true for insurers. Their capitalisation is good, and their solvency has improved, with the average coverage ratio of the major insurers rising by 9 percentage points to reach 241%.