3. 5 %. i do not think this is high enough yet. as i have already mentioned, the extent to which interest rates will actually have to rise will depend on the incoming data. one thing is for sure – once we have hit that peak rate, key interest rates will stay at that level for as long as necessary. if we are to overcome inflation, we need both persistence and tenacity. furthermore, the necessary normalisation and tightening of monetary policy requires central banks to reduce their balance sheets. the eurosystem will now reduce its balance sheet at a faster pace, which i very much welcome. reinvestments under our largest asset purchase programme ( the app ) will be completely discontinued as of july, 6 / 9 bis - central bankers'speeches meaning that bond holdings will fall by an average of €25 billion per month. according to the latest decision, it is still envisaged that principal payments under the pandemic emergency purchase programme ( pepp ) will be fully reinvested by the end of 2024. the securities holdings from the monetary policy purchase programmes are not the only factor contributing to the reduction in the eurosystem's balance sheet total. banks are also paying back their long - term loans to us. when it comes to reducing the balance sheet, more speed is a good thing. i am not concerned that the market will be unable to cope with this reduction. even if market volatility were slightly higher, it would not be a disaster, as markets were significantly more volatile before the 2008 financial crisis than they are at present. but, of course, we will make sure that the process is approached with an appropriate level of moderation on the whole. the ecb governing council must also ensure that rises in key interest rates are transmitted to real economic activity via the financial sector as smoothly as possible. the rapid and sharp interest rate hikes have caused banks'funding costs to increase considerably. as a result, bank loans have also become more expensive and lending conditions have tightened. loan growth has slowed markedly due to both the less favourable conditions as well as weaker demand for loans from enterprises and households. monetary policy tightening is having an effect, but not an excessive one. despite the recent turmoil in the financial system, especially in the us banking sector, the transmission of monetary policy in the euro area has not fundamentally changed thus far. the euro area banking system has proved resilient and sound. a large part in this has been played by

as micro - economic weaknesses and imbalances – in the latter case i am thinking specifically about national banking systems – and recommend appropriate policies to achieve internal stability and external viability. thus, it could serve as a prominent tool for preventing externalities and international crises. of course national authorities have to be prepared to adopt corrective policies in a timely manner – if called for. the future of official international organizations to what extent the efforts of international organizations to produce stability have been successful in the past is open to debate. unfortunately, financial crises have occurred in recent years in several countries. all elements – the setting of codes, rules and procedures, their implementation and monitoring – have to be respected to safeguard international economic and financial stability. some initiatives are already under way in this respect. in general, it seems crucial that the international organizations concentrate – not least under conditions of scarce resources – on their core mandates. as concerns the imf, the surveillance function must play a dominant role on the basis of professional diagnosis and frank and open discussion of therapy. not completely new though is the problem of non - complying countries that refuse corrective policies suggested by the imf and supported by its membership. at some point in time, when non - compliance heightens the risk of a crisis, the imf must go beyond confidential channels of communication with the respective country. while we do not want the imf to become a kind of rating agency, the imf should under appropriate circumstances issue data information to encourage the respective authorities to correct some “ dangerous policies ”. another element of the fund ’ s preventive role is the design and monitoring of data publication standards like the sdds to enhance transparency of the national economic situation and policies as a means to facilitate solid judgements by markets participants that allocate financial flows. i mention the financing role of the imf at this late stage, since it generally comes into play when preventive efforts of all players have not succeeded. it is certainly a more visible and glamorous role, especially in crises situations, than the day to day business of surveillance, but it is a sign of failure of the preventive role. a rising need for imf financing reflects a poor grade for the fund ’ s surveillance efforts. generally speaking, the more successful the surveillance, the less imf financing is required. of course, conditionality under fund supported programs should be subject to the same test to demonstrate its effectiveness. this implies that successful work of the imf should be reflected in