that the introduction of the negative interest rate policy has been effective in making the signalling channel, which is implicit in our forward guidance, more compelling and credible. 2 / 5 bis central bankers'speeches importantly, in order to anchor short and medium - term interest rates at levels that are close to the lower bound, this portion of the curve had to be insulated from flows of news that otherwise would have entailed an unwarranted change in the monetary policy stance. the conceptual basis for this is exactly the same as the one that, in ordinary times, justifies the tight control that central banks exert on the overnight rate. ordinarily, the central bank “ targets ” the overnight interest rate, which implies that it seeks to protect that rate from shocks – say, originating in the interbank market for liquidity or elsewhere – that, if not offset, would nudge the monetary policy stance in directions that would not be appropriate, given the state of the economy. as i said before, in unconventional monetary policy times, as the overnight rate becomes increasingly constrained to the downside, the notion of the “ operating target ” is generalised to encompass a whole range of interest rates with longer maturities. consequently, insulating those interest rates, to the extent possible, from the impact of external surprises that should not alter the stance becomes an important precondition for a successful reflation strategy. in this regard, over the past three years one could say that we have been effective in shielding short - to - medium term interest rates from shocks that could have weakened the stimulus that the euro area needed to consolidate the recovery ( see chart 2 ). anchoring the short and intermediate segments of the yield curve around levels consistent with a very accommodative monetary policy stance has been even more critical for us at the ecb than for other central banks engaging in similar policies. the reason for this reflects the unique structure of the euro area ’ s monetary policy transmission mechanism. compared with the united states, for example, transmission in the euro area is much more reliant on banks. and short - tomedium term rates are very important benchmarks that euro area banks use for pricing loans, notably to non - financial corporations. one way to see the connection between euro area credit markets and different segments of the yield curve in the euro area is to look at the interest rate fixation periods for loans to non - financial corporations and households ( see chart 3 ). interest rates on loans to

inflation. food price inflation and underlying price pressures across the economy have strengthened and will persist for some time. amid exceptional uncertainty, eurosystem staff have significantly revised up their inflation projections. they now see average inflation reaching 8. 4 per cent in 2022 before decreasing to 6. 3 per cent in 2023, with inflation expected to decline markedly over the course of the year. inflation is then projected to average 3. 4 per cent in 2024 and 2. 3 per cent in 1 / 4 bis - central bankers'speeches 2025. inflation excluding energy and food is projected to be 3. 9 per cent on average in 2022 and to rise to 4. 2 per cent in 2023, before falling to 2. 8 per cent in 2024 and 2. 4 per cent in 2025. the euro area economy may contract in the current quarter and the next quarter, owing to the energy crisis, high uncertainty, weakening global economic activity and tighter financing conditions. according to the latest eurosystem staff projections, a recession would be relatively short - lived and shallow. growth is nonetheless expected to be subdued next year and has been revised down significantly compared with the previous projections. beyond the near term, growth is projected to recover as the current headwinds fade. overall, the eurosystem staff projections now see the economy growing by 3. 4 per cent in 2022, 0. 5 per cent in 2023, 1. 9 per cent in 2024 and 1. 8 per cent in 2025. the decisions taken today are set out in a press release available on our website. i will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions. economic activity economic growth in the euro area slowed to 0. 3 per cent in the third quarter of the year. high inflation and tighter financing conditions are dampening spending and production by reducing real household incomes and pushing up costs for firms. the world economy is also slowing, in a context of continued geopolitical uncertainty, especially owing to russia's unjustified war against ukraine and its people, and tighter financing conditions worldwide. the past deterioration in the terms of trade, reflecting the faster rise in import prices than in export prices, continues to weigh on purchasing power in the euro area. on the positive side, employment increased by 0. 3 per cent in the third quarter, and unemployment hit a new historical low of 6. 5 per cent in october.