transmission to the real economy remain more uncertain. i would draw from this three policy conclusions : a. in the usual alleged time lag of one to two years for monetary transmission, our economic situation makes it likely that we are presently closer to the upper range. and hence the commitment i reaffirm today to bring inflation back towards 2 % by 2025, is consistent with the full transmission of the monetary tightening that will have been put in place by summer 2023. page 13 sur 14 b. against this backdrop of significant transmission “ in the pipe “ and still to come, a deceleration in the size of the policy steps ( from 50bp to 25 bp ) was wise and cautious. we obviously keep our hands free, but we add the capacity of observing and monitoring the pass - through of our substantial and exceptionally rapid past hikes. persistence is now more important than speed ; the duration for which we will maintain rates is now more important than the precise terminal level we will reach. or in other words, for interest rates as with ballistics, “ longer ” is becoming more significant than “ higher ”. c. hence, our next rate decisions should not monopolise attention ; we already have completed most of our rate - hiking journey, and we are clearly in restrictive territory. that said, as i said already last january, i expect today that we will be at the terminal rate not later than by summer. summer is a long and beautiful season, which starts in june and ends in september. in the meantime, we have three possible governing councils either for hiking or pausing ; but don ’ t deduce a guidance from this or a preference for a given terminal rate. we will remain data driven, looking meeting by meeting at the outlook for headline inflation as well as for the dynamics of underlying inflation and the strength of monetary policy transmission. * * * monetary policy is at work and rest assured, we ’ ll do the job : we ’ ll bring inflation back towards 2 %. we ’ ll do it with the necessary patience – looking at the 2025 horizon for full transmission, with persistence – maintaining restrictive interest rates for long enough, and pragmatism – monitoring actual economic data. but once more, monetary policy cannot be the only game in town. fiscal policies should gradually adjust and consolidate, reducing first and foremost energy subsidies ; wage negotiations and mark - up decisions by firms should incorporate the expected decrease in inflation ; and still more, structural reforms are needed more than

economic management and better coordination and bargaining position in international institutions. increased convertibility of regional currencies and subsequently, creation of a single currency area will also minimize exchange rate uncertainty and eliminate volatile swings in the exchange rate, reduce transaction costs and lower interest rates and inflation. in addition, creation of larger markets in the eac region will enable members to leverage their relative comparative advantages into one unified block of economic activity capable of offering more goods and services on the international market than its competitors. furthermore, bridging infrastructure gaps through joint regional infrastructure projects that target key regional transport corridors will support trade and investment in the region. finally, integration will allow for free movement of goods and labour skills within the region in response to market demand. bis central bankers ’ speeches however, regional integration comes with some challenges. we have learnt from eu the pitfalls of regional integration : firstly, integration of economies could lead to loss of national sovereignty. to illustrate this, eac partner states may have to give up some of their sovereignty to supra - national institutions to be created such as the east african central bank ( eacb ), east african assembly, the commission on financial services, among others. secondly, partner states may no longer be able to enact policies to meet their specific needs and interests if such policies are in conflict with regional initiatives. for instance, use of fiscal or monetary policy to pursue a specific country development agenda. thirdly, it may be difficult for national governments to create and implement policies based on their own particular needs. in this regard, fiscal rules could limit a country ’ s ability to increase public debt to finance critical infrastructure projects or social safety nets. but one of the demonstrated challenges is the problem associated with the sovereign debt crisis in the euro zone. dissimilarities in current debt levels and structure also pose a threat. finally, the distribution of benefits and costs may be unequal due to different levels of development, as eu has demonstrated. therefore, the involvement of stakeholders is crucial for the success of regional integration initiatives. your excellency, ladies and gentlemen, despite the challenges, experience has shown that the benefits from regional integration outweigh costs. regional integration can promote peace, economic progress, structural change and growth with lasting benefits for the eac region. central banks have a role to play to make these benefits a reality and improve the livelihoods of the east african people. central banks will be required to contribute to the development and prosperity of the eac region through