The elimination of Central Bank credit to the public sector will go far to create the confidence needed to launch the crucial struggle with inflation. Central banks are responsible for keeping prices stable as well as for ensuring that the financial system runs smoothly. A stabilized financial system and stable prices are essential conditions for steady economic growth in the medium term because only a stable financial system can provide the necessary link between savings and investments. Price stability is needed to reduce uncertainties for investors and encourage investments. In the long run, stabilizing prices is likely to increase both living standards and productivity. For this reason, the price stability that is the main goal of central banks is valid and urgent not only in the short run, but also in the long run. And once countries like ours have achieved price stability after long effort, they must continue the effort to maintain it. For central banks, price stability is a permanent goal. Inflation inflicts several burdens on a society: · Overall, it introduces uncertainty into economic decisions and profit seeking. · It reduces the discipline of price and market systems. · It has negative effects on the cost of capital. · It directs resources to unproductive activities. In periods of high inflation, investments in real estate and financial investments become more desirable. · Growth declines as inflation rises. In countries with high inflation, it has been observed that most resources are directed to the financial system.

While the European banking sector as a whole is well capitalised, a pronounced deterioration in the macroeconomic outlook would imply a renewed increase in credit risk at a time when some credit institutions are still in the process of working out COVID-19 pandemic-related asset quality problems. Without forgetting that the resilience of credit institutions is also affected by structural factors, including overcapacity, competition from new providers of financial services as well as exposure to cyber and climate risks. Besides, the ESRB has identified a number of other risks that are deemed elevated, in relation to imbalances in the residential and commercial real estate sectors –which are more acute in some Member States than in others–, the likelihood of large-scale cyber incidents, and high public indebtedness. Summing up, there is no shortage of challenges and, in this context, preserving or enhancing the resilience of the Union's financial sector remains essential to ensure its capacity to support the real economy if and when financial stability risks materialize, - Credit institutions can act as a first line of defence, by ensuring that their provisioning practices and capital planning properly account for expected and unexpected losses that may be caused by the deterioration in the risk environment. - Micro- and macroprudential capital buffers that are consistent with the prevailing level of risk can also help to ensure credit institutions' resilience. Some national authorities have already tightened macroprudential policies, while others are currently exploring whether these policies could be implemented to address vulnerabilities.