, but the war is eroding growth ] russia ’ s brutal, illegal war in ukraine has profoundly transformed the european security order, as well as the economic policy landscape, with global ramifications. as an expression of europe ’ s firm support of ukraine, the european commission yesterday recommended candidate status for ukraine, which is a critical, major step in ukraine ’ s journey towards eu membership – and i assume the eu leaders will soon endorse it. before the war broke out, the eurozone economy had recovered from the pandemic better than expected. while russia ’ s share of the world economy is small, knock - on effects of the war are amplifying the supply bottlenecks and impacting energy, commodity and food prices. these headwinds will weigh on confidence and dampen growth in the near term, but once they abate, economic activity is expected to pick up again. the ecb ’ s latest eurozone projections forecast annual real gdp growth of 2. 8 % in 2022, 2. 1 % in 2023 and 2. 1 % in 2024. like in the us, the inflation outlook is ever more challenging for the eurozone, with headline inflation accelerating above 8 % in may. [ slide # 3 inflation dynamics – a driver and an anchor ] currently, we have a very clear driver and likewise a very clear anchor for inflation dynamics in the eurozone. the driver is of course energy inflation, as fuel prices have steeply increased since the summer of 2021. the anchor is a relatively moderate level of wage inflation – at least until recently. let me elaborate in a bit more detail on these. [ slide # 4 inflation on the rise in the eurozone – energy inflation explains ] while eurozone inflation has risen mainly because of surging energy and food prices, inflationary pressures have recently broadened and intensified. the latest ecb projections forecast an annual eurozone inflation rate of 6. 8 % in 2022, after which it is projected to decline to 3. 5 % in 2023 and to 2. 1 % in 2024. headline inflation at the end of the projection horizon is thus expected to be only slightly above the ecb ’ s target of 2 %. it must be underlined that energy inflation and supply chain bottlenecks alone would not lead to a sustained acceleration in inflation. in the medium term, the critical question is whether rising energy prices will increase inflation expectations and wage demands, leading to a wage - price

savings than we can currently estimate. the ecb, major forecasters like the imf, central bank watchers and the current pricing in the financial markets all seem to agree that the euro area inflation rate will return to our 2 % target in a sustained manner in the course of next year. since prolonged high inflation could put the well - anchored inflation expectations at risk, any further delay in achieving the target cannot, of course, be accepted. slide 8. the ecb decisions in april the key message from our policy meeting last week was that although the key ecb interest rates are at levels that are making a substantial contribution to the ongoing disinflation process, we no longer see the need to maintain them at the current levels for a long duration. 3 / 4 bis - central bankers'speeches it is also worth noting that with the extent of disinflation already seen, real short - term rates are now higher than we expected them to be when the policy rate was raised to the current level last september. with declining inflation and delayed economic growth, we are continuously assessing how restrictive our policy stance is and should be. without prejudging our primary objective of price stability we need to avoid a stance that unduly delays the closing of the negative output gap. the risks to the growth outlook remain tilted to the downside. russia's unjustified war against ukraine and the intensified conflict in the middle east are major sources of geopolitical risk, feeding uncertainty and potentially increasing energy prices again. clearly, geopolitics is the risk factor that could derail the improving outlook for the euro area economy. as headline inflation and underlying inflation have continued to slow down and inflation expectations have remained well anchored, we can start dialling back monetary restraint as summer approaches. provided that we are confident that inflation will continue converging to our 2 % target in a sustained way, the time will be ripe in june to start easing the monetary policy stance and to cut rates. this obviously assumes that there will be no further setbacks in the geopolitical situation and thus in energy prices. we in the ecb governing council will continue to follow a data - dependent and meetingby - meeting approach when determining the pertinent policy stance. we will set our rates based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary transmission. and we are not precommitting to any rate path. thank you very much for your attention