9  For example, around 18% of extracted energy products (gas and coal) and 9% of oil products consumed in the EU are imported from Russia, compared with just 3% and 2.5%, respectively, of those consumed in Spain. 10 See J. Quintana (2022). “Economic consequences of a hypothetical suspension of Russia-EU trade”, Analytical Articles, Economic Bulletin 2/2022, Banco de España. 4  The decline in activity is also reflected in the adverse performance of international trade, which began to decelerate in spring. In addition, although suppliers’ delivery times and bottlenecks have improved, the latter’s effects remain significant. In parallel, most commodity prices have tended to moderate since mid-year in view of the prospects of a global economic slowdown, among other factors. Overall, the financial markets consider that the likelihood of a global recession has risen significantly. In particular, there is concern about the possible effects of the current simultaneous tightening of monetary policy in numerous geographical areas. The individual decisions of each central bank are fully justified because inflationary pressures are very high and persistent in each of their jurisdictions. However, this raises the question of whether, in such an interconnected world, simultaneous tightening could lead to an excessively restrictive monetary policy stance worldwide, especially for emerging market economies.11 2. Recent developments and outlook In H1 the economy has benefited from the easing of COVID-19 restrictions The aforementioned recessionary forces are not yet reflected in the euro area’s economic data for the first half of the year.

The TPI seeks to ensure that our monetary policy stance is transmitted smoothly across all euro area countries, a prerequisite for the ECB to be able to deliver on its mandate. The ECB’s actions over this period must be understood in light of the new monetary policy strategy approved in 2021, which establishes a symmetric medium-term inflation target of 2%. This medium-term orientation means that rather than basing our decisions on the latest inflation figure, or even the inflation that we expect for the coming quarters, we base them on our projections over a two or three-year horizon. This is because our actions affect inflation very gradually, reaching their maximum impact after about two years. Maintaining a medium-term horizon in the definition and attainment of the target is particularly important in the face of certain kinds of shocks (such as adverse supply-side shocks, which push inflation and activity in opposite directions in the short term). Needless to say, predicting inflation over a two or three-year horizon is a very challenging task. Especially in a setting as uncertain as the current one. With this in mind, we use various indicators, such as surveys of professional forecasters and financial market prices. Key data include the ECB staff projections, which, in turn, draw on a huge store of economic and monetary analysis. These projections have gradually revised medium term inflation upwards. Thus, in September the average inflation forecast for 2024 stood at 2.3%, above our target and the December 2021 projections (1.8%).