. over a longer horizon, we remain concerned about the sustainability of global economic growth being undermined by persisting imbalances. this relates, in particular, to the sustainability of public finances and to external imbalances in some regions of the world. recent inflation rates, measured by the hicp, developed broadly as anticipated. the annual rate of inflation was 2. 1 % in october, according to eurostat ’ s flash estimate. it thus remained unchanged from august and september. when looking ahead over the shorter term, it appears that inflation rates may continue to hover around this level for several months to come and, hence, may not fall as quickly and strongly as had been expected up to the summer. three factors can be identified as contributing to this stickiness of inflation rates. first, in the remainder of 2003 and early 2004, unprocessed food prices could imply some limited upward pressure as a consequence of this summer ’ s heat wave. second, oil prices remain higher than expected, owing to political uncertainties in the middle east. last but not least, in the course of 2004, planned increases in indirect taxes and administered prices in some euro area countries will have an upward impact on inflation. however, when taking into account more lasting factors, we continue to expect inflation rates to moderate over the medium term and to develop in line with price stability. this expectation is based on the assumption that wage developments will not be affected by the current inertia of inflation rates, and will remain moderate in the context of a gradual economic recovery. moreover, the past appreciation of the euro should continue to dampen price pressures. these views are also reflected in recently released forecasts. at the same time, inflation expectations warrant close monitoring. turning to the monetary analysis, after an extended period of strong m3 growth, liquidity in the euro area remains ample, despite a certain slowdown in monetary expansion over recent months. this situation of persistently more liquidity than is needed to finance non - inflationary economic growth reflects past portfolio shifts, precautionary savings and the low level of interest rates. the low level of interest rates also supported the annual growth of loans to the private sector, which fluctuated between 4½ % and 5 % in recent months. at the current juncture, the accumulation of excess liquidity is not of concern for price stability, given the economic outlook. however, if it were to continue in conjunction with a significant strengthening of economic activity, it could lead to

scaling up green finance can be a driver for a carbon neutral economy, financial integration and stability in the euro area. strengthening the capital markets union ( cmu ). the strengthening of the cmu is necessary for the completion of european economic and monetary union because it will reduce market fragmentation and encourage diversification of financial resources. the development of a green cmu can support the move to a cmu by adding depth and diversification to the financial instruments available, also enhancing the risk sharing capacity of the eu financial system. green capital markets are dynamic and relatively well integrated in europe. they provide a rapidly growing market and are the location of choice for green bond issuance and esg investment. important elements of a green cmu include corporate sustainability disclosures, green financial products with official eu seals, such as the eu green bond standard, and harmonised regulation and supervision for sustainable finance. a green cmu would both make the eu economy more resilient and more environmentally sustainable. but what role can central banks play in tackling climate change? 1 / 3 bis central bankers'speeches climate - related risks are a source of instability and financial vulnerability. physical and transition risks, like more frequent and more extreme weather events or a late and abrupt transition to a low - carbon economy, could affect the transmission of monetary policy and pose risks to price, financial and economic stability. it is therefore within the mandate of central banks to prevent risks to price stability, and, along with bank and insurance companies ’ supervisors, to ensure that the financial system is resilient to these risks ; this urgently needs to be translated into concrete measures, both on monetary policy and supervisory fronts. although the main responsibilities remain with the governments, with their tax subsidies and investment policies, central banks can undertake an active role in tackling climate change. central banks have already started considering how the physical and transition impact of climate change can be included in macroeconomic forecasting and financial - stability monitoring. also, central banks have been undertaking work to integrate climate - related risks into prudential regulation and supervision, engaging with rating agencies and financial firms to ensure that climate - related risks are understood, disclosed and incorporated in risk assessment and in credit provision decisions. until recently, most central banks had focused mainly on raising awareness around climate change risks and considering the impact of these issues on their own operations. yet, central banks can and are committed to do more than that. at the governing council of the european central bank ( ecb ), we agreed