luis de guindos : presentation of the european central bank annual report 2022 to the committee on economic and monetary affairs of the european parliament introductory remarks by mr luis de guindos, vice - president of the european central bank, to the committee on economic and monetary affairs of the european parliament, brussels, 25 may 2023. * * * i am pleased to be back before the econ committee to present the ecb's annual report for 20221, which we have published today together with our written feedback on the resolution on our activities you adopted earlier this year. 2 these documents, as well as today's hearing, are fundamental for the ecb's accountability relationship with this parliament. we greatly value this dialogue with you as it allows us to reach out to the public, which is especially important in times of high inflation. in my remarks today, i will first focus on the outlook for the economy and the appropriate monetary policy response. i will then discuss the importance of a resilient financial system in supporting the real economy. the outlook for the economy and the appropriate monetary policy response the euro area economy grew modestly in early 2023. activity is being supported by lower energy prices, easing supply bottlenecks and fiscal policy support to firms and households. but domestic demand, especially consumption, remains weak. headline inflation declined from its october peak and stood at 7. 0 % in april. core inflation remains elevated, partly because of input cost pressures. upside risks to inflation stem from, among other things, higher than expected wage and profit margin growth, and a potential lasting rise of longer - term inflation expectations above our target. downside risks relate to possible renewed financial market tensions and weaker demand, due for example to a more marked slowing of bank lending or a stronger transmission of monetary policy. as the inflation outlook continues to be too high for too long, we decided at our may meeting to raise our key policy rates again, by 25 basis points. we also announced that the governing council expects to discontinue reinvestments under the asset purchase programme ( app ) as of july this year. while our key interest rates are the primary tool for setting our monetary policy stance, the reduction of the app portfolio also helps to normalise monetary policy. 3 while the speed and scope of our policy tightening since last july has already been unprecedented, our future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our

art of central banking communication was, with only very few exceptions, to display the diagnosis of the central bank with a delay of five or six weeks by publishing the minutes. as a rule, no timely and comprehensive explanation was given by issuing a detailed communique and by holding a press conference after the policy meeting. in fact, the ecb was among the first central banks to give a real time detailed analysis and diagnosis and to organize regular press conferences and, to date, it still remains the only one doing so shortly after each of its monetary policy meetings. in our press conferences, we give a full and detailed explanation of our analysis and of the reasons underlying our policy decisions. the introductory statement opening our press conference consists of an extended summary of the deliberations of the governing council in which the situation is assessed and our diagnosis expressed. the press conference furthermore allows a transparent interaction with participants and, through them, with the full body of observers, savers and investors. all this wealth of information is provided in “ real time ”. in addition, the ecb ’ s monthly bulletin provides the public with the full set of detailed assessments and data underlying our policy decisions only a few days after they are taken. this demonstrates our strong will to be transparent. our commitment for transparency has been actually more and more acknowledged. this is reflected in the evidence of the first five and a half years ( supported by recent empirical work ) which suggests that we have been highly predictable in our decisions - at least as much as other very influential central banks. this also demonstrates that our monetary policy is well understood by external observers. monetary policy strategy let me now come to the third factor behind the success of the euro and the ecb, which lies at the heart of our monetary policy concept : the ecb ’ s monetary policy strategy. to devise the best possible monetary policy for the new currency, we aimed to build on the wisdom and the wealth of experience with the conduct of monetary policy that had been accumulated in the preceding decades by central banks and academic institutions in industrialised countries, in particular those forming the euro area. the ecb ’ s definition of price stability as i have emphasised above, the basis for our strategy is our mandate from the treaty to maintain price stability as the primary objective of monetary policy. in order to make this mandate operational, the governing council of the ecb in october 1998 sharpened the focus by defining price stability in quantitative terms as the year - on - year increase in the harmon