to be compatible with our mandate, any new instrument would have to be justified solely on monetary policy grounds, comply with the principle of proportionality and contain sufficient guarantees to prevent it from entering into conflict with the ban on monetary financing of governments. there would also need to be an explanation of what sets the new instrument apart from omt. the final condition, relating to economic incentives, is that it is crucial that member states continue to have sufficient incentives to conduct their fiscal and economic policies in a sustainable manner and reduce their debt levels. effective fiscal conditionality is indispensable in this case. it is clear that our current focus must be on the very high inflation rates. it is important to concentrate all of our efforts on combating this high level of inflation. i would now like to thank you for listening and wish you fruitful discussions, an insightful exchange of ideas and all the best for the event. footnotes : 1. european central bank, eurosystem staff macroeconomic projections for the euro area, june 2022, footnote 10. 2. draghi, m., monetary policy in the euro area, opening keynote speech at the frankfurt european banking congress, frankfurt am main, 21 november 2014.

. and quite possibly, the projection will once again have to be revised upwards next time. so it ’ s appropriate to exercise caution in this regard, especially since the risks are clearly tilted to the upside – and by that, i mean energy delivery stoppages. 3 need for monetary policy action 3. 1 how far will key ecb interest rates rise? but it is not just our own experts who do not see inflation declining rapidly. shortterm inflation expectations have risen significantly of late. and this concerns the expectations of professional market participants and observers alike as well as households and firms. what monetary policy needs to prevent at all events is a situation where mediumterm to long - term inflation expectations drift away from our inflation target. expert surveys indicate that while these expectations have risen, they are still roughly at our target of 2 %. for monetary policy, anchoring medium - term to long - term inflation expectations is critical “ as it ensures that temporary movements in inflation do not feed into wages and prices and hence become permanent. ” that point was driven home by mario draghi back in 2014 – that is, in a different setting altogether. if that was right back then, it is just as right today. thus, a de - anchoring of inflation expectations has to be prevented no matter what. which now calls for resolute monetary policy action. the more tentatively monetary policy acts now, the more it risks getting into a situation where it would need to tighten all the more strongly and abruptly further down the line in order to preserve price stability. the example of the us federal reserve in the early 1980s shall serve as a lesson here. back then, the fed raised its policy rate to 19 %, no less, willingly accepting the cost of two severe recessions. inflation expectations had become de - anchored at the time, and only extremely high interest rates helped curb the soaring inflation. we do not want to get to that point. that is why we need to act in a timely fashion. it is clear, then, that the interest rate move planned for 21 july is only the first step up the staircase. the ecb governing council made its announcement of a second step on 8 september equally clear. the number of subsequent steps we will have to climb up the interest rate staircase will depend on the medium - term inflation outlook. if this does not improve, a more sizeable interest rate hike would be completely appropriate, in my view. we are assuming that further interest rate steps will follow,