a prolongation of the war is still a major source of uncertainty for europe. and, more generally, the future course of the world economy is also a matter of concern, against a backdrop of global monetary policy tightening and significant geopolitical risks. second, in relation to the recent stress in the banking sector, so far the implications have been contained, leading to a certain tightening of overall euro area financial conditions, mainly through its impact on risk premia2. however, should they persist or heighten, these tensions could lead to a sharper than expected tightening of credit conditions and erode confidence and give rise to a scenario of more moderate economic growth and more rapidly declining inflation. a third element that adds a certain degree of complexity to the inflation outlook relates to fiscal policy. in 2022 and 2023, euro area countries significantly increased their fiscal policy support measures to protect businesses and households from rising energy prices and inflation, bringing the total gross stimulus to close to 2 % of euro area gdp in both years. while these measures helped to contain inflation in 2022 and are expected to do so in 2023, the extent of their impact this year is still uncertain. and the withdrawal of these measures will push consumer prices upwards in the coming years, especially in 2024. 3 in this regard, it is important to stress that, in the current high inflation setting, an appropriate policy mix requires a fiscal stance that, at the aggregate euro area level, is not at odds with the tightening of our monetary policy. this means that government support measures should be temporary, targeted and tailored to preserving incentives to consume less energy, and they should be gradually rolled back as energy prices fall. otherwise, we are at risk of driving up medium - term inflationary pressures, which would call for a stronger monetary policy response. the ten - year risk - free rate yield on april 7th was 15 bps below the level reached at the cut - off date for the projection exercise on february 15th. however, risk premia have risen, reflecting the increased uncertainty, and so did the average cost of financing in the capital markets for banks and low credit quality non - financial corporations in the euro area. thus, the average cost of long - term capital market financing for banks has increased by 6 bps, while in the case of low credit quality non - financial corporations the cost has increased by 45 bps.. for investment grade companies, the cost of financing has decreased by 14 pb. on equity markets,

gas price shock are quite persistent, peaking after one year. 9 thus, even if gas prices have returned to levels close to those at the start of the war in ukraine, the upward effects of gas prices on core inflation could still be significant in the short term. moreover, the transmission of inflationary pressures reflects specific demand and supply - side factors linked to the pandemic and the lifting of mobility restrictions. for see f borrallo, f, l. cuadro - saez, m. pacce and i. sanchez. ( 2023 ). “ consumer food prices : recent developments in the euro area and spain ”. economic bulletin - banco de espana, 2023 / q2, 01. see alonso i, l. lopez, d. santabarbara and m. suarez - varela ( 2022 ) “ the eu economies ’ natural gas inventories in 2022 and 2023 under two hypothetical scenarios ”. box 2, “ quarterly report on the spanish economy ”, economic bulletin 4 / 2022, banco de espana. see costain j, a. nakov and b. petit ( 2022 ), “ flattening of the phillips curve under state - dependent prices and wages ”, economic journal 132 ( 642 ), pp. 546 - 581. see gonzalez minguez, j., s. hurtado, d. leiva - leon and a. urtasun. ( 2023 ). “ the spread of inflation from energy to other components ”. economic bulletin - banco de espana, 2023 / q1, 02. borrallo, f., l. cuadro - saez and j. j. perez ( 2022 ). “ rising food commodity prices and their pass - through to euro area consumer prices ”, analytical articles, economic bulletin 3 / 2022, banco de espana. lopez, l., s. parraga and d. santabarbara ( 2022 ). “ the pass - through of higher natural gas prices to inflation in the euro area and in spain ”, box 4, “ quarterly report on the spanish economy ”, economic bulletin 3 / 2022, banco de espana. instance, the presence of global supply chain bottlenecks, the rapid intensification of demand once restrictions were lifted or the impact of changes in work and living habits, which led to increased consumption of housing - related goods and services. according to our estimates, demand factors were of minor