percentage point from annual real gdp growth each year until 2024 compared to a counterfactual where interest rates and balance sheet expectations would have remained unchanged since december 2021. conclusion let me conclude. inflation is high at the moment and the risks associated with this situation should not be underestimated. monetary policy has to tighten to ensure that inflation does not become entrenched. but the impact of the current shocks on the output gap is clearly unclear. it would be misguided to base an aggressive tightening on assumptions which cannot be conclusively substantiated. the consequences of possible errors may not be perceptible today, but they would become evident over time. it may then be too late to fully reverse them. annexes 14 november 2022 slides english 1. potential output can be defined as the highest level of economic activity that can be sustained by means of the available technology and factors of production, in particular labour and capital, without creating inflationary pressure. see andersson, m., szorfi, b., toth m. and zorell, n. ( 2018 ), “ potential output in the post - crisis period ”, ecb economic bulletin, issue 7. 2. slack is a proxy of the economy ’ s capacity to grow without straining resources and leading to excessive cost and price rises. 3. the likelihood of hitting the lower bound in a crisis had increased with the fall in nominal and real rates, which mainly reflected the success of monetary policy in anchoring inflation expectations and a fall in the natural ( real ) rate of interest. the latter was driven by ageing, waning productivity growth, a rise in markups and a surge in risk aversion in the wake of the global financial crisis. see brand, c., bielecki, m. and penalver, a. ( eds. ) ( 2018 ), “ the natural rate of interest : estimates, drivers, and challenges to monetary policy ”, occasional paper series, no 217, ecb, december. 4. demand shortfalls may perpetuate themselves, resulting in persistent or even permanent impacts on output ( hysteresis ), by adversely affecting the supply potential of the economy and thereby lowering the level of potential output or even its longer - term growth rate. for instance, firms may refrain from undertaking investment decisions or cut their innovation budgets. see andersson, m. et al. ( 2018 ), op. cit. and yellen

, to the targeted longer - term refinancing operations and the purchase of covered bonds and asset - backed securities which i mentioned earlier. for sure, in times such as these we need to be prepared. that is why the ecb ’ s governing council agreed at the beginning of november that the appropriateness of the monetary policy stance should be closely observed. in concrete terms, this means that if it should become necessary to further counteract the risks of a prolonged period of low inflation, the governing council intends to take additional unconventional measures within its mandate. even if it is good to be prepared, one should beware of showing activism. there is no automatic mechanism to initiate further programmes. the ecb ’ s governing council has not decided on a target for the size of the balance sheet ; it has rather unanimously expressed an expectation. a kind of mechanical expansion of the ecb ’ s balance sheet cannot be an end in itself. all of our decisions are to be evaluated against the background of current and medium - term inflation expectations. consequently, we must continually analyse current price increases to identify the components which comprise the weaknesses in price developments. short - term developments are not key, especially when they are largely determined by energy and food prices. the underlying trend and the firm anchoring of inflation expectations are decisive, as well as the orientation of the euro area as a whole. low inflation rates in some member states – even when negative – are not in themselves a breach of the target. they can be necessary to restore lost competitiveness. one could also argue about whether it is really necessary to consider further measures given that the measures already taken have not yet been able to have an effect. monetary policy does not take effect immediately, but only with a certain time lag. as a rule we should take this time and wait and see. which measures are we talking about here? the large - scale purchase of securities, including government bonds, is often seen as a panacea. as i said, even for innovative or unconventional measures, the costs and benefits, and the opportunities and risks must be carefully considered. some central banks have used quantitative easing to quickly and decisively provide monetary policy impetus, adjusted to the specificities of their environment. it is these particular central banks and their measures to which we are compared. for me, these are idle comparisons. the following saying applies here : those who constantly compare themselves with others might become more like them, but they won ’ t necessarily become any better