, observed in the euro area last year and part of this year, need to be monitored closely, even though they are currently expected to normalise. the liquidity conditions in the euro area banking system is another area to monitor, since it plays a role for transmitting monetary policy and, consequently, affects inflation. these uncertainties are the reason why i believe the ecb governing council approach to be data - dependent in its interest rate decisions, is indeed the right one. in other words, determine the appropriate level and duration of its tightening policy stance, based on incoming economic and financial data and the consequent projections. at this point, i would like to emphasise the complementary role of fiscal policy in supporting and not counteracting the effectiveness of monetary policy, in this currently challenging environment. it is important that governments employ only targeted fiscal measures, supporting the most vulnerable in society. any horizontal measures should be avoided or rolled back to prevent an escalation in medium - term inflationary trends. such horizontal measures risk extending the duration of high inflation, and consequently would force the extension of the duration of high interest rates in order to tame inflation and bring it back to the 2 % target. i would finally like to address another important aspect, which is the synergetic relationship between price stability and financial stability. the pursuit of price stability through monetary policy, as we just discussed, and of financial stability through macroprudential policy, are to a large extend complementary. monetary policy needs to take financial stability and the stance of macroprudential policy into account. monetary 2 / 3 bis - central bankers'speeches policy and macroprudential policy operate through common transmission channels, meaning that the scope for interaction between the two policy spheres is wide. the bottom line is that a stable price environment can foster economic growth and financial stability, while a stable financial system can make it easier for central banks to achieve their price stability objectives, through monetary policy. there are a number of macroprudential measures in the toolkit of macroprudential authorities, which are typically the national central banks, that assist in preserving and safeguarding financial stability. these include capital - based measures, borrower based measures and liquidity - based instruments. capital - based measures target the banks'capital to increase the overall resilience of the banking sector by mitigating the build - up of risk exposures. borrower based measures, in other words for loan holders, impose quantitative restrictions, such as

transition towards a sustainable greener economy are among the challenges that the cyprus banking sector faces. it is important to say that these challenges are not country specific to the banking system of cyprus. they are challenges that are commonly faced by european banks. especially the issues of digital transformation together with the management of climate risks and the transition to a green economy are key issues that should be on top of the agendas'of european economies and banks. they surely are on the top of the supervisory agenda. conclusion let me now conclude. the world's economy has gone through the various problems caused by the pandemic to the consequences of the ukraine war. for the first time in many years, inflation has become a threat for many countries around the world. growth is down and inflation is up. this is a big setback for the global recovery. the decisions we make now will have far - reaching consequences for our future. we need to be determined to make difficult choices. but if these choices are based on data, on what we learned from the past and on a clear understanding of the evolving challenges, then i am sure we will come out from this crisis stronger and better equipped for a more sustainable and resilient economic future. 4 / 4 bis - central bankers'speeches