. however, the forecasts should be interpreted in caution, which is a problem that i have already touched upon. first, tensions in energy markets could persist for longer than assumed in the forecasts. second, the still high commodity prices could be passed on to consumers to a greater extent. and third, wages could rise more strongly than expected, partly in response to inflation surprises. 3 monetary policy in view of these price developments and the outlook for inflation, the ecb governing council has acted decisively. it has taken the first steps towards normalising monetary policy. in july, we set the interest rate reversal in motion. we raised key interest rates by 0. 5 percentage point and brought the chapter of negative deposit rates to a close. in september and october, we followed this up with even larger interest rate hikes of 0. 75 percentage point. further interest rate increases are necessary to bring the inflation rate back to 2 %. the size of each interest rate step and how high we will raise the rates will depend on how the data and outlook develop. however, monetary policy normalisation is about more than just raising key interest rates. the ecb governing council will also look at the large holdings of bonds. these currently stand at almost €5 trillion. and they continue to push euro area bond yields down significantly. all of these monetary policy measures are able to curb inflation – not immediately, but with a lag. in any case, as the governing council of the ecb, we must ensure that the high rates of inflation come to a swift end. ultimately, there is no question that the longer inflation remains high, the higher the risk that longer - term inflation expectations will rise. it would then be all the more difficult for monetary policy to restore price stability. and this would increase the risk of inflation becoming entrenched at a high level over the medium term. the eurosystem has a mandate to maintain price stability. i will therefore continue to do all i can to ensure that we, as the ecb governing council, do not – under any circumstances – let up too soon, that we press ahead with monetary policy normalisation with determination – even if our measures dampen economic growth. because in a situation where monetary policy lags behind the curve, the macroeconomic costs would be significantly higher. 4 banks in germany ladies and gentlemen, what must be going through your mind right now when you, as representatives of banks, hear about the determination to resolutely normalise

morning's session is all about the status quo for banks – the smaller institutions and the big ones. big or small – they all find themselves operating in a fundamentally altered environment. one that is characterised by the reversal of interest rates and by economic prospects that are not just gloomy but exceptionally uncertain as well. i'd like to begin by briefly outlining those prospects. you will notice that the theme of uncertainty is a leitmotif running throughout my remarks. 2 economic activity and inflation 1 / 4 bis - central bankers'speeches germany's economy was still in good shape going into the summer. economic output was almost back at its pre - pandemic level in the second quarter. and in the third quarter, too, pandemic - related re - opening effects were probably still shoring up economic activity. however, high inflation and uncertainty surrounding the energy supply and the costs thereof dragged increasingly on the german economy. retail trade suffered real declines. activity in the construction sector slowed down. in view of the high gas prices, efforts were made to save gas, particularly in industry. in some sectors, production was cut back and, in part, relocated. despite these headwinds, gross domestic product still posted a slight increase in the third quarter, climbing by 0. 3 % on the quarter according to the federal statistical office's flash estimate. however, sentiment deteriorated sharply as the third quarter progressed : at enterprises across all sectors and among consumers. indeed, the consumer climate index fell to a new record low. the gas supply situation is currently better than expected – gas storage facilities are well filled, i'm pleased to say. at present, our bundesbank experts are leaning towards not expecting outright rationing in germany this winter. it could still be a close call, though, depending on how the weather and consumption patterns play out. incentives to save gas are therefore still as important as ever. high energy costs may, however, cause output to decline further, particularly in industry. the recent downbeat production plans and export expectations in industry are consistent with that view. moreover, the considerable losses in purchasing power and households'subdued mood for spending are likely to lead to a drop in private consumption. service providers whose businesses are heavily dependent on private consumption will probably bear the brunt of this. economic output could fall significantly overall in the final quarter of 2022 and first quarter of 2023. this would mean we would be faced with a recession, i. e. a