today. although i focus on the u. s. experience, my remarks apply to most countries at that time. in the 1970s, the fed did not have an inflation objective. it believed that there was a permanent trade - off between unemployment and inflation. as difficult as it may be to imagine today, in the early 1970s, fed chairman arthur burns argued that monetary and fiscal policies could not control inflation. to bring down inflation, burns advocated compulsory wage and price controls. those controls were, in fact, adopted but they did not work. it should not be surprising that, in those circumstances, central banks had not established their credibility. consequently, long - term interest rates, which incorporate inflation expectations, jumped up quickly to double - digit figures. they remained very high into the mid - 1980s. today, the situation is different. during the last several decades, central banks have established credibility, using price stability - oriented monetary policy to do so. the ecb, like most other central banks, has a medium - term inflation objective at 2 per cent. before the outbreak of the pandemic, the ecb mostly delivered on its objective, a few years slightly above its objective, but most of the time below that objective. the credibility central bankers have earned provides some space for monetary policy to operate to reduce the unemployment and output costs of the inflationary shocks. in other words, we have a single needle on our compass - inflation in the medium term. so long as the needle remains centred on this objective, we have used the flexibility provided by our credibility to minimise the damage to growth and employment caused by these shocks. question 1 : as you mentioned, inflation is now at an exceptionally high level. some critics say the ecb was slow to react to rising inflation. what is your answer to those critics? 3 / 7 bis - central bankers'speeches the ecb has embarked on policy normalisation, in two distinct phases. the first major phase was initiated in december last year and has entailed the ending of net purchases via our two landmark programmes, the app and the pepp, the phasingout of both our collateral easing measures and the very favourable terms of our targeted refinancing operations. in july, we entered a new phase in our policy normalisation that has entailed the adjustment of our rates towards levels that will ensure the timely decline of inflation to our 2 per cent medium - term target. as i highlighted before, there were several inter - related

first the erm i and subsequently the euroarea. speculators are always waiting round the corner and, sometimes, markets may wish to test the country ’ s resolve to maintain its exchange rate targets. therefore, we followed throughout the six years before entering the euroarea a high interest rate policy so as first to keep foreign investors happy and keep their confidence but also in order to build a high level of foreign exchange reserves so as to be able to have sufficient reserves to thwart speculative attacks. indeed, when the 1997 south - east asian crisis spill over effects reached greece in september - october and american hedge funds started speculating heavily ( up to $ 2 billion daily ) against the drachma and the word was spread that the drachma would devalue by as much as 28 % we were able to defend our parity by drawing on our foreign exchange reserves and by raising interest rates temporarily, for a couple of days at a time. we were, however, concerned not to scare the markets, which might have perceived our moves as resulting from panic, and, therefore, we were very careful about how the policy tightening was presented. instead of raising our intervention rate ( lombard rate ) from 19 % to 330 % we temporarily put a surcharge of 0, 4 % daily at the end of october. this move looked innocuous and passed smoothly, while penalizing heavily banks ’ cost of borrowing. accordingly, we sent the right signal to the market and this permitted us to eliminate the surcharge within a few days, so a quasi - normal situation was soon restored. we were also very careful in the way our foreign exchange interventions were executed. in most cases, we wanted to show our determination to defend the parity and, therefore, the bank of greece ’ s foreign exchange department intervened directly in the market but, sometimes, we judged that an intervention through a friendly foreign bank could be more persuasive and influence market sentiment better. both the government and the bank of greece knew that our fundamentals were rapidly improving and our economy had entered a virtuous cycle of rapid growth, falling inflation and fiscal deficits and with relatively small current account deficits by past standards, so we did not hesitate even for a second, regarding our policies and goals. we became even more determined than before to continue our stabilization policies and defend the exchange rate so as not to delay our entry in to the euroarea. our determination paid off and foreign exchange markets after