have a deep, meaningful, and, most important, practical, understanding of the largest, most systemically important, banks operating in the united states, as well as an understanding of the markets in which they operate. i believe that it can do so, in its role as umbrella supervisor of banking organizations and direct supervisor of state chartered member banks, while respecting the prerogatives of the primary supervisors of banks and other holding company subsidiaries that are not under its direct supervisory authority. and, an important point given the u. s. institutional structure, such an approach continues to be consistent with a healthy dual banking system - - in which banks chartered by the federal government and by the respective states exist and compete side - by - side. the value of the dual banking system has withstood the test of time. crisis management and liquidity assistance the global trends toward market finance, consolidation, and global integration has expanded the range of liquidity and other crisis scenarios that central banks may need to confront. the market turmoil in the autumn of 1998 and the extreme risk - aversion that pervaded credit markets in 2002 amid accounting scandals in the united states may suggest that major market disruptions are probably more likely today to originate from shocks to financial markets that are outside the banking sector. of course, if such shocks and the attendant market stress appear to pose risks to a central bank ’ s macroeconomic objectives, policymakers can make appropriate adjustments to the stance of monetary policy. in addition, if policymakers are particularly concerned about improbable but highly costly events, they might well wish to consider market stress in their monetary policy deliberations even when the modal forecasts for macroeconomic variables such as inflation and economic growth have not changed much. central banks can also be a calming influence on markets in a crisis simply by standing ready, as i noted earlier, to provide liquidity assistance if necessary. although shocks may originate in global debt and equity markets, they may well reverberate in the banking sector. for example, in 1998, banks were faced with a surge in loan demand from borrowers with reduced access to their usual market funding sources. assistance from the central bank may involve expanding the liquidity of the entire financial system through open market operations, or it could entail direct loans through the discount window to meet the liquidity demands of specific institutions. on the latter point, i would note that the federal reserve has recently restructured its lending programs so that credit can be routinely

again push up the costs of energy and food. there could also be an additional drag on euro area growth if the world economy weakened more sharply than we expect. moreover, the recovery would face obstacles if the pandemic were to re - intensify and cause renewed supply disruptions. however, the energy shock could fade away faster than anticipated and euro area companies could adapt more quickly to the challenging international environment. this would support higher growth than currently expected. the risks to the inflation outlook have also become more balanced, especially in the near term. on the upside, existing pipeline pressures could still send retail prices higher in the near term. moreover, a stronger than expected economic rebound in china could give a fresh boost to commodity prices and foreign demand. domestic factors such as a persistent rise in inflation expectations above our target or higher than anticipated wage rises could drive inflation higher, also over the medium term. on the downside, the recent fall in energy prices, if it persists, may slow inflation more rapidly than expected. this downward pressure in the energy component could then also translate into weaker dynamics for underlying inflation. a further weakening of demand would also contribute to lower price pressures than currently anticipated, especially over the medium term. financial and monetary conditions as we tighten monetary policy, market interest rates are rising further and credit to the private sector is becoming more expensive. bank lending to firms has decelerated sharply over recent months. this partly stems from lower financing needs for inventories. but it also reflects weakening demand for loans to finance business investment, in the context of a steep upward move in bank lending rates and a considerable tightening in credit standards, which is also visible in our most recent bank lending survey. household borrowing has continued to weaken as well, reflecting rising lending rates, tighter credit standards and a sharp fall in the demand for mortgages. as 3 / 4 bis - central bankers'speeches loan creation decelerates, money growth is also slowing rapidly, with a marked decline in its most liquid components, including overnight deposits, only partially compensated by a shift to term deposits. conclusion summing up, the governing council will stay the course in raising interest rates significantly at a steady pace and in keeping them at levels that are sufficiently restrictive to ensure a timely return of inflation to our two per cent medium - term target. accordingly, we today decided to raise the three key ecb interest rates by 50 basis points and we expect to raise them further. in view of the underlying inflation pressures, we intend