rising wages are set to restore some lost purchasing power, supporting consumption. as the economy weakens, however, job creation is likely to slow, and unemployment could rise over the coming quarters. fiscal support measures to shield the economy from the impact of high energy prices should be temporary, targeted and tailored to preserving incentives to consume less energy. fiscal measures falling short of these principles are likely to exacerbate inflationary pressures, which would necessitate a stronger monetary policy response. moreover, in line with the eu's economic governance framework, fiscal policies should be oriented towards making our economy more productive and gradually bringing down high public debt. policies to enhance the euro area's supply capacity, especially in the energy sector, can help reduce price pressures in the medium term. to that end, governments should swiftly implement their investment and structural reform plans under the next generation eu programme. the reform of the eu's economic governance framework should be concluded rapidly. inflation 2 / 4 bis - central bankers'speeches inflation declined to 10. 0 per cent in november, mainly on the back of lower energy price inflation, while services inflation also edged down. food price inflation rose further to 13. 6 per cent, however, as high input costs in food production were passed through to consumer prices. price pressures remain strong across sectors, partly as a result of the impact of high energy costs throughout the economy. inflation excluding energy and food was unchanged in november, at 5. 0 per cent, and other measures of underlying inflation are also high. fiscal measures to compensate households for high energy prices and inflation are set to dampen inflation over next year but will raise it once they are withdrawn. supply bottlenecks are gradually easing, although their effects are still contributing to inflation, pushing up goods prices in particular. the same holds true for the lifting of pandemic - related restrictions : while weakening, the effect of pent - up demand is still driving up prices, especially in the services sector. the depreciation of the euro this year is also continuing to feed through to consumer prices. wage growth is strengthening, supported by robust labour markets and some catch - up in wages to compensate workers for high inflation. as these factors are set to remain in place, the eurosystem staff projections see wages growing at rates well above historical averages and pushing up inflation throughout the projection period. most measures of longer - term inflation expectations currently stand at around two per cent, although further above - target revisions to some indicators warrant

continued monitoring. risk assessment risks to the economic growth outlook are on the downside, especially in the near term. the war against ukraine remains a significant downside risk to the economy. energy and food costs could also remain persistently higher than expected. there could be an additional drag on growth in the euro area if the world economy were to weaken more sharply than we expect. the risks to the inflation outlook are primarily on the upside. in the near term, existing pipeline pressures could lead to stronger than expected rises in retail prices for energy and food. over the medium term, risks stem primarily from domestic factors such as a persistent rise in inflation expectations above our target or higher than anticipated wage rises. by contrast, a decline in energy costs or a further weakening of demand would lower price pressures. financial and monetary conditions as we tighten monetary policy, borrowing is becoming more expensive for firms and households. bank lending to firms remains robust, as firms replace bonds with bank loans and use credit to finance the higher costs of production and investment. households are borrowing less, because of tighter credit standards, rising interest rates, worsening prospects for the housing market and lower consumer confidence. 3 / 4 bis - central bankers'speeches in line with our monetary policy strategy, twice a year the governing council assesses in depth the interrelation between monetary policy and financial stability. the financial stability environment has deteriorated since our last review in june 2022 owing to a weaker economy and rising credit risk. in addition, sovereign vulnerabilities have risen amid the weaker economic outlook and weaker fiscal positions. tighter financing conditions would mitigate the build - up of financial vulnerabilities and lower tail risks to inflation over the medium term, at the cost of a higher risk of systemic stress and greater downside risks to growth in the short term. in addition, the liquidity needs of nonbank financial institutions may amplify market volatility. at the same time, euro area banks have comfortable levels of capital, which helps to reduce the side effects of tighter monetary policy on financial stability. macroprudential policy remains the first line of defence in preserving financial stability and addressing medium - term vulnerabilities. conclusion summing up, we have today raised the three key ecb interest rates by 50 basis points and, based on the substantial upward revision to our inflation outlook, we expect to raise them further. in particular, we judge that interest rates will still have to rise significantly at a steady pace to reach levels that