on euro area bond yields. in my view, there is much to be said, then, for soon setting aside the practice of replacing all maturing bonds. this additional tightening signal would underscore our commitment to ensuring that inflation returns to the medium - term target of 2 % in a timely manner. if we act too hesitantly, we run the risk of having to tighten monetary policy even more severely further down the road. past experience, too, has taught us that if monetary policy gets behind the curve, medium - term inflation expectations adjust upwards. and that would make it far more difficult for monetary policy to achieve price stability. 2 / 5 bis - central bankers'speeches this is why it would be wrong to now hold back on further steps towards normalisation for fear of a downturn. on the contrary, unrestrained inflation is itself a burden on the economy. the longer inflation remains high, the more of a strain it places on consumption and investment. and the greater the risk of it becoming entrenched at a high level in the medium term. that has to be prevented from happening. for my part, it is important that we be honest : curbing inflation also comes with a price tag. it is likely to temporarily be an additional dampener on growth. but the main culprits behind the economic weakness are the supply bottlenecks caused by the pandemic and the war. honesty also means acknowledging that the lift - off in interest rates will make interest rate risk materialise on balance sheets. this also affects us as a central bank : we hold a high stock of low - interest securities with, in some cases, very long residual maturities. the counterpart to these on our balance sheet is mainly short - term deposits of commercial banks. the interest on these is now rising. as a result, this may weigh on our annual results. the provisions on our balance sheet are available as an initial buffer against potential losses arising from financial risks. 4 fiscal policy : targeted softening of hardships we have to recognise that the path to price stability is not a sprint but a marathon. unlike the runners in the berlin marathon, we do not know from the outset how much longer we still have to run until we reach our goal. this is especially true since monetary policy measures do not have their full effect on inflation immediately, but only after a delay. to make rapid progress on this route, fiscal policy can also play a part. it is an enduring principle that sound public finances

/ 5 bis - central bankers'speeches inflation stood at 4. 8 % in september. in other words, price pressures are now broadbased. there is also some evidence to suggest that inflation in the euro area will remain high for the time being, with the latest ecb staff macroeconomic projection putting it at 5. 5 % next year. while most forecasts assume that inflation rates will move towards 2 % again in the medium term, merely converging on this target cannot be enough for the eurosystem – after all, it is vital to achieve the 2 % rate in the medium term. moreover, forecasts could lull us into a false sense of security. past projections have, after all, underestimated actual price dynamics on multiple occasions. caution is therefore warranted here, especially as uncertainty is extremely high and risks are clearly tilted to the upside. for example, tensions in energy markets could persist for longer than assumed in the forecasts. still - high commodity prices might be passed on to consumers on a greater scale than usual. wages could rise more sharply than previously anticipated. 3 monetary policy needs to step up to the plate to safeguard price stability in this situation, all eyes are focused on monetary policy, and rightly so. whilst it may not be able to lower gas prices or make butter cheaper, what it most certainly can do is prevent high inflation from becoming entrenched. this could happen if households, enterprises and wage bargainers keep expecting higher inflation rates in the future. monetary policy in the euro area now needs to step up to the plate – and that's what we are doing. the ecb governing council initiated the lift - off in interest rates at our meeting in july, and in september we followed this up with an even bigger interest rate hike. these decisive interest rate steps are important for achieving price stability, which is why i very much welcome the decisions. but it is also clear that we cannot stop here. short - term real interest rates are still very low, in some cases even negative. in other words, monetary policy is not yet dampening inflation, but is still driving it. further steps along the path to monetary policy normalisation need to be taken, then. how large the individual interest rate steps will be and how far we raise interest rates will be dependent on the data. it is also important to look into the high levels of bond holdings. these currently amount to almost €5 trillion and continue to exert considerable downward pressure