exceptionally accommodative after coping with the lengthy period of deflationary pressures and the pandemic shock. let me now turn to inflation, the key variable of our monetary policy. a series of supply - side disruptions and a rapid recovery in global demand have pushed inflation significantly above our medium - term target of 2 %, after almost a decade of too - low inflation. this might not necessarily be an undesirable development, if the reasons behind the pick - up in inflation were about to fade soon, bringing inflation swiftly to its target. however, inflation expectations have adjusted and shifted upwards, with financial market and consumer survey indicators pointing to inflation between 2 % and 3 % in the medium and longer - term. 2 moreover, expected inflation is becoming an important element in price setting in euro area firms, as shown by the ecb survey. 3 high inflation – coupled with labour market tightness - has also triggered calls for higher wage rises. the ecb's experimental wage tracker so far points to a moderate increase in wage growth in this year and the next, below the projected inflation in the euro area. however, the longer the high 2 / 5 bis - central bankers'speeches inflation rates persist, the likelier it is that they will be transmitted to higher wage growth and potentially lead to a wage - price spiral. in the medium term, therefore it seems possible that inflation will settle at higher levels than we have observed in the recent years, even after the existing supply shocks fade. we could face a switch to a higher inflation regime, as some of the drivers of past deflationary pressures have lost steam, such as global trade liberalisation and the integration of low - wage chinese workers to the global economy. at the same time, some structural inflationary factors are gaining momentum, namely the green transition, strengthening of the eu's strategic autonomy and the reorganisation of global supply chains with possible nearshoring. there will still be some deflationary forces at play, such as rapid digital transformation, other innovation and elevated debt levels, but there is a question as to whether these could overcome the inflationary forces. let me now turn to monetary policy. given the high inflation in the euro area, reaching 8. 1 % annually in may and ranging from 5. 4 % in malta to 20. 1 % in estonia, together with strengthening inflation expectations, we need to make further steps towards normalisation of our monetary policy. after we ended net asset purchases under the

so low. we understand that. but they also have to bear in mind that lenders were very well protected in and after the crisis – and that none of germany ’ s large neighbours slipped into a depression. that too would have had a serious impact on the economy, not least in germany. what do you say to those people who put money to one side month by month in order to be able to afford a little something when they get older – but whose plans won ’ t work out now because of the zero interest rates? we have studied how the low interest rates affect the disposable income of households, including in germany. people not only earn interest on their savings, but they also borrow money – for example, if they buy a house. and the results show that the advantages offset the disadvantages. so there ’ s no reason to complain? yes there is, because of course not everyone benefits. all monetary policy decisions have 1 / 3 bis central bankers'speeches undesirable distributional effects as well. consider, for example, the equity markets, where prices have risen dramatically. in germany, those suffering most from the low interest rates are middle - aged people who own a small fortune and have invested it largely in savings accounts and in interest - bearing securities – i. e. it ’ s not very diversified. are you telling germans that their money would be better invested in shares? of course i ’ m not giving investment tips ; i ’ m a central banker. and to be honest, i invest my money in a similar way to most germans. in germany, some economists are already warning about the economy overheating – and in many other countries in the euro area, the recovery is now evident. isn ’ t it the right time to exit from the policy of extremely cheap money? as a central bank, we conduct monetary policy for the whole of the euro area – and this policy has been working. there is a broad - based recovery happening and it will probably continue. germany has made a bit more progress than others in that respect. the output gap is closing, in other words, germany ’ s economy is exploiting its potential virtually to the full. surprisingly, prices are still rising slowly. but this will change over the short or long term. and it will help to trigger a change in monetary policy. so there is light at the end of the tunnel. before you raise the key interest rates, you intend to wind down government bond purchases from the