speech the fight against inflation speech by christine lagarde, president of the ecb, at “ deutscher sparkassentag 2023 ”, hanover frankfurt am main, 1 june 2023 hanover is a city of great significance. ludwig erhard once described it as the emblem of german ambition and vitality. and, over the years, hanover has been justifiably proud of its role in germany ’ s industrial development. nowhere is this more obvious than at the hannover messe. since inception in 1947, hannover messe has showcased the passion and economic potential of german workers and entrepreneurs to the world. the fair has become a symbol of the german wirtschaftswunder, intimately linked to post - war german reconstruction and the subsequent economic and industrial success. success in which the german savings banks have played a pivotal role. with a history spanning 200 years, you have consistently served as a reliable financial partner, supporting and promoting the german industry through crises and transformation. it is no wonder that around three out of four businesses in germany are customers of the savings banks. and your business is also the intersection point of our monetary policy and the economy. we depend on banks to transmit our policy to firms and households – in good times and in bad. our changes to interest rates feed through into bank lending rates, altering people ’ s propensity to spend and invest – and ultimately the path of growth, employment and inflation. in this sense, even though we have different goals, we are partners in the pursuit of price stability. today, inflation is too high and it is set to remain so for too long. we are determined to bring it back down to our 2 % medium - term target in a timely manner. that is why we have hiked rates at our fastest pace ever – and we have made clear that we still have ground to cover to bring interest rates to sufficiently restrictive levels. these hikes are already feeding forcefully into bank lending conditions, including here in germany. and we know that – having hiked so far and so fast – considerable tightening is still in the pipeline. but it remains uncertain just how much stronger the transmission of our policy will be. so, we need to continue our hiking cycle until we are sufficiently confident that inflation is on track to return to our target in a timely manner. at the same time, we need to carefully assess the strength of monetary policy transmission to financing conditions, the economy and inflation. in my remarks today, i would like to look at

about how tighter financing conditions will affect the economy, and whether the effects will be stronger or weaker than in the past. firms have not faced a steep rise in funding costs for more than a decade, while the economy has changed considerably in that time – and may still be changing after the pandemic. this means that we need to observe closely the impact of our measures over time. we might already be seeing some early indications of their effects across sectors. a marked divergence has emerged between manufacturing activity, which looks to be contracting, and services, which are expanding – especially in the leisure and tourism sectors. this can largely be explained by continued reopening effects : people are consuming more of the services they were denied during the pandemic, such as travel and eating out, while spending less on goods that they stocked up on during lockdowns. but monetary policy may also be playing a role. tighter financing conditions may already be constraining households ’ total spending, forcing them to substitute between sectors. and spending on durable goods is likely to be more affected by higher financing costs, as some of these are typically bought on credit. by contrast, for this summer at least, our consumer surveys show that tighter monetary policy is not going to affect people ’ s holiday plans. as our rate increases percolate through the economy, we will get a clearer picture of how much the tightening we have already done is biting – and how much more is needed to ensure that inflation is decisively squeezed out of the economy. conclusion let me conclude. the motto of the sparkassen is “ weil ’ s um mehr als geld geht ”. and this, in many ways, also applies to the ecb. our job is to create money and to preserve its value. but we do so because, in the long run, price stability produces the best and fairest outcomes for people and businesses. today, to return to my analogy, the airplane is still climbing – and it will keep going until we have enough speed to glide sustainably and land at our destination. but the reaction function we have laid out will help to strike the right balance for our monetary policy decisions in the future : between further tightening to tame inflation on the one hand and uncertainty about the speed and strength of policy transmission on the other. one thing, however, is certain : we will keep moving forward – determined and undeterred – until we see inflation returning to our 2 % medium - term target in