inflation. if price pressures feed through into higher than anticipated wage rises or the economy returns more quickly to full capacity, inflation could turn out to be higher. financial and monetary conditions market interest rates have remained broadly stable since the october governing council meeting. bank lending rates for firms and households remain at historically low levels. overall, financing conditions for the economy remain favourable. lending to firms is partly driven by short - term funding needs stemming from supply bottlenecks that increase their expenses for inventory and working capital. at the same time, corporate demand for loans remains moderate because of retained earnings and generous cash holdings, as well as high debt. lending to households remains robust – driven by demand for mortgages. euro area banks have further strengthened their balance sheets thanks to higher capital ratios and fewer non - performing loans. banks are now as profitable as they were before the pandemic. bank funding conditions remain favourable overall. in line with our new monetary policy strategy, twice a year the governing council assesses indepth the interrelation between monetary policy and financial stability. an accommodative 3 / 4 bis central bankers'speeches monetary policy underpins growth, which supports the balance sheets of companies and financial institutions, as well as preventing risks of market fragmentation. at the same time, the impact of accommodative monetary policy on property markets and financial markets warrants close monitoring as a number of medium - term vulnerabilities have intensified. still, macroprudential policy remains the first line of defence in preserving financial stability and addressing medium - term vulnerabilities. conclusion summing up, the euro area economy continues to recover, despite a slowdown in the near term. the sharp increase in energy prices and demand outpacing constrained supply in some sectors are pushing up inflation. inflation will remain above our target for most of 2022, but is likely to ease in the course of next year. at the same time, given the progress on economic recovery and towards our medium - term inflation target, we can discontinue net purchases under the pepp in march. but monetary accommodation is still needed – including net purchases under the app and our forward guidance on interest rates – for inflation to stabilise at our two per cent inflation target over the medium term. we are now ready to take your questions. 4 / 4 bis central bankers'speeches

of 2024. in any case, the future roll - off of the pepp portfolio will be managed to avoid interference with the appropriate monetary policy stance. third, the pandemic has shown that, under stressed conditions, flexibility in the design and conduct of asset purchases has helped to counter the impaired transmission of our monetary policy and made our efforts to achieve our goal more effective. within our mandate, under stressed conditions, flexibility will remain an element of monetary policy whenever threats to monetary policy transmission jeopardise the attainment of price stability. in particular, in the event of renewed market fragmentation related to the pandemic, pepp reinvestments can be adjusted flexibly across time, asset classes and jurisdictions at any time. this could include purchasing bonds issued by the hellenic republic over and above rollovers of redemptions in order to avoid an interruption of purchases in that jurisdiction, which could impair the transmission of monetary policy to the greek economy while it is still recovering from the fallout of the pandemic. net purchases under the pepp could also be resumed, if necessary, to counter negative shocks related to the pandemic. fourth, in line with a step - by - step reduction in asset purchases and to ensure that the monetary policy stance remains consistent with inflation stabilising at our target over the medium term, we decided on a monthly net purchase pace of €40 billion in the second quarter and €30 billion in the 1 / 4 bis central bankers'speeches third quarter under the asset purchase programme ( app ). from october 2022 onwards, we will maintain net asset purchases under the app at a monthly pace of €20 billion for as long as necessary to reinforce the accommodative impact of our policy rates. we expect net purchases to end shortly before we start raising the key ecb interest rates. we also confirmed the level of the key ecb interest rates and our forward guidance on the future path of policy rates. this is crucial for maintaining the appropriate degree of accommodation to stabilise inflation at our two per cent inflation target over the medium term. we will continue to monitor bank funding conditions and ensure that the maturing of tltro iii operations does not hamper the smooth transmission of our monetary policy. we will also regularly assess how targeted lending operations are contributing to our monetary policy stance. as announced, we expect the special conditions applicable under tltro iii to end in june next year. we will also assess the appropriate calibration of