##ar as real interest rates will not substantially move up in the medium term. indeed, the rise in prices would push up the denominator of the debt - to - gdp ratio, an effect that is currently dominating the dynamics. it is nevertheless important to outline a realistic path for continuing the gradual recovery in the high levels of public debt to gdp that started last year. it would be an important signal of credibility for financial markets, which could translate into lower sovereign risk premiums. the budgetary margins that will become available and those created with the moderation of the dynamics of other expenses will make it possible to provide financial support to the economy. temporary and targeted support, with interventions aimed at households and firms in greater difficulty, will not compromise the state of the public finances and will also help to contain pressures on inflation. let me now turn on the euro area. in its latest projections, released in early september, the ecb revised gdp growth estimates to 0. 9 per cent in 2023, from 3. 1 per cent in 2022 ; with a month of additional data, the imf has revised them down to 0. 5 per cent, signalling a substantial halt. consumer price developments are no less concerning : inflation rose to 10. 7 per cent in october. net of energy and food, the most volatile components, core inflation rose to 5. 0 per cent. more than 60 per cent of the increase in consumer prices recorded in the last twelve months has been caused, directly and through the effects on production costs, by the increases in energy prices. this share rises to almost 80 per cent if we also take into account the effects of food prices not relating to energy, but which have also been affected by the conflict in ukraine. the growth of consumer prices in the euro area is projected to be above 8 per cent on average in 2022 ; it would then gradually fall to below 6 per cent over the course of next year and converge towards a value close to the ecb's 2 per cent target in the second half of 2024. expectations derived from the prices of inflationlinked swaps as well as those based on surveys carried out in october, such as those conducted by the ecb on monetary analysts or those of other private institutions, provide a similar picture. the expectations of households, as suggested by the ecb survey, display slightly higher values : 5 per cent by the end of 2023 and 3 per cent over a 3 - year horizon. this could reflect not

##al low of 0. 3 %. when we last met here in may 2013 it was still at 1. 4 %. the sharp fall in oil prices since the summer – down by 30 % in euro terms since early june – explains a significant portion of this fall. but measures of underlying inflation – stripping out volatile items such as energy and food – have also continued trending down. falling core inflation points to weakness in broad aggregate demand – consistent with the loss of economic momentum we observed in recent bis central bankers ’ speeches months. and our latest staff projections foresee a material downgrade of the macroeconomic outlook. these developments have also affected inflation expectations. short - term inflation expectations have almost moved in tandem with the fall in headline inflation. but more recently – basically since the summer – we have also observed a fall in medium - to long - term inflation expectations. in principle, these should not be too reactive to short - term commodity price gyrations. does this mean our actions have not been binding enough? not necessarily. first, notwithstanding their recent decline, most market - and survey - based measures of medium - term inflation expectations remain in close vicinity to our aim to keep inflation close to, but below 2 %. second, the fall in market - based measures was not limited to the euro area. break - even rates and medium - term inflation swaps also fell in other jurisdictions, such as in the us. this of course does not mean that we can ignore these developments. well - anchored inflation expectations are indispensable for medium - term price stability. they provide a nominal anchor for the economy. and even more so in the current environment : given the potency of the current oil price shock, the risk is that inflation may temporarily fall into negative territory in coming months. normally, any central bank would prefer to look through a positive supply shock. after all, lower oil prices boost real incomes and may lead to higher output in the future. but we may not have that luxury at present. the reason is that shocks can change : in certain circumstances supply shocks can morph into demand shocks via second - round effects. in these conditions monetary policy needs to react to what initially appeared to be a supply shock, so as to prevent a destabilisation of inflation expectations. remember : this is the binding element of our strategy. in light of this, the governing council last week reiterated that should the monetary stimulus fall short of our intention to move our balance sheet towards the dimension it