the pace of innovation ; unfavourable demographic trends in advanced economies ; and the recycling of savings from developing economies toward advanced economies. the rate fall leads to the reduction of space for conventional stimulating monetary policies in the future. the correlation between aggregate demand and the inflation rate has weakened in the short and medium term, as a result of developments in the labour market and increasing integration of the global economy. this phenomenon renders the monetary policy action more costly. the financial innovation and the increasing awareness of the correlation between economic and monetary stability, on the one hand, and the financial system, on the other, have reduced the space for conventional monetary policy instruments. 2 / 5 bis central bankers'speeches despite the complexity, recommendations for dealing with these challenges have been put forward. they range from the modification of the monetary policy mandate to enriching the array of instruments it employs, and its better combination with the macro - prudential policy. i am certain that the issues set out above will be addressed at length during the day. from my perspective, the consensus on the shape of the new ‘ normal ’ of the monetary policy should maintain three key elements : first, avoiding multiple, ambiguous and non - transparent objectives related to the monetary policy. this principle would sustain the credibility of the monetary policy, as a prerequisite for increasing the effectiveness and decreasing the side effects from its intervention. second, acknowledging the limits of the monetary policy, both in the short and medium term, and in the long term. in the short and medium term, the monetary policy often encounters limited effectiveness, especially in the case of financial crises, or negative side effects in the form of heightened risk in the financial system. this limitation stresses the need for supplementing and coordinating it with other economic management policies. in parallel, the monetary policy alone does not have adequate instruments for generating a sustainable acceleration of the growth pace in the long term. this limitation underlines the argument that the monetary policy is not and may not be a substitute for structural reforms. third, in designing the range of instruments at the disposal of the monetary policy, care should be taken to avoid the risk in the central banks ’ balance sheet, which would negatively affect their independence. * * * the experience of the bank of albania in withstanding the crisis and fostering growth in the wake of the crisis illustrates some of the key topics i mentioned above. in response to the aggregate demand slowdown and the subsequent negative implications on employment, soundness of financial balance sheets

4 bis - central bankers'speeches inflation has fallen further this year and is expected to continue declining in the medium term, but at a slower pace. measures of underlying inflation have been easing but domestic price pressures remain elevated. wage growth has remained strong amid robust labour markets but has been moderating recently, while profits are absorbing part of the effects of wage increases on prices. the ecb reacted forcefully to heightened inflation : it raised its key policy rates by a cumulative 450 basis points between july 2022 and september 2023 and has kept them unchanged since then. we are determined to ensure that inflation returns to our 2 % medium - term target in a timely manner. at our most recent monetary policy meeting on 11 april 2024 we considered that the key ecb interest rates are at levels that are making a substantial contribution to the ongoing disinflation process. our future decisions will ensure that our policy rates will stay sufficiently restrictive for as long as necessary. if our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase our confidence that inflation is converging to our target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction. in any event, we will continue to follow a data - dependent and meeting - by - meeting approach to determining the appropriate level and duration of restriction, and we are not precommitting to a particular rate path. let me also give you a brief update on the operational framework review we concluded in march, which you have discussed on previous occasions with the ecb president. 3 the changes will affect how central bank reserves will be provided as excess liquidity gradually declines. the governing council will continue to steer the monetary policy stance by adjusting the deposit facility rate ( dfr ) and short - term interest rates are expected to evolve in the vicinity of the dfr with tolerance for some volatility. liquidity will be provided through a broad mix of instruments, including existing regular refinancing operations as well as – at a later stage – new structural longer - term credit operations and a structural portfolio of securities. our existing regular refinancing operations will continue to be conducted through fixed - rate tender procedures with full allotment against broad collateral, and the interest rate on the main refinancing operations will be adjusted later in the year to 15 basis points above the deposit facility rate. the key parameters of the framework will be reviewed in 2026 or earlier if