triggered liquidity stress in related derivatives markets. an increase in initial margin requirements has greatly increased firms ’ liquidity needs, making it more difficult for some firms to hedge. this recent episode raises the question of whether margining practices, including those between the clearing member and their clients, may be too procyclical. financial markets remain vulnerable to further corrections that could potentially be triggered by an escalation of the war, or a faster - than - expected pace of monetary policy normalisation. conclusion let me conclude. sound financial regulation and greater resilience have helped the european financial system navigate both the pandemic and the economic fallout stemming from the russia - ukraine war. yet sizeable challenges remain. to address financial stability risks, we need to implement targeted macroprudential policy instruments. at the same time, amid global inflationary pressures and risks to growth, we are walking on a narrow path as we strive to deliver on our price stability mandate. but rest assured, we remain fully committed to stabilising inflation at our 2 % target over the medium - term.

of the supply chain disruptions resulting from recent restrictions in asia. following a steady rise in the course of 2021, inflation reached a record high of 7. 4 % in march 2022, remaining at this level in april. price increases will most likely remain high over the coming months, mainly because of the rise in energy costs but also due to higher food prices and renewed supply chain disruptions. medium - term inflation expectations remain anchored, close to our 2 % target. that said, we are closely monitoring for second - round effects, notably wage - setting behaviour. we need to prevent the scenario where the high inflation that we currently see becomes entrenched in expectations. we are faced with an exceptional degree of uncertainty regarding the outlook for economic activity and inflation. so we need to move gradually and cautiously as we normalise our monetary policy. at our april meeting, the ecb ’ s governing council judged that the incoming data reinforced our expectation that net asset purchases under the asset purchase programme should be concluded in the third quarter. i would expect this to happen earlier in the third quarter rather than later. a first interest rate hike could take place some time after that, depending on our evolving assessment of the outlook. our june staff projections will put us in a better position to appraise where the euro area economy is heading. we need to observe the impact that shifts in financing conditions and the erosion of purchasing power are having on activity and inflation dynamics. for the past two years, the combination of fiscal and monetary policy has been crucial in helping the euro area to navigate the pandemic. this combination remains critical today. monetary policy has to ensure that inflation stabilises at 2 % over the medium - term while fiscal measures need to be very selective, targeted and temporary – also in part because fiscal space is now more limited than it was in 2020 and 2021. despite the current uncertainty, financial markets have, so far, remained relatively calm. if stress conditions arise, we will deploy flexibility to ensure that monetary policy is transmitted smoothly across the euro area, as we did to good effect during the height of the pandemic. financial stability the macroeconomic forces i have just discussed, amplified by the economic fallout from the russiaukraine war, also have implications for the financial stability outlook. the improved economic conditions throughout 2021 helped to reduce near - term risks to financial stability. but medium - term vulnerabilities continued to build up in the latter half of last year. the pandemic left