and food prices were the main drivers of inflation. yet non - energy industrial goods and services also became considerably more expensive. it is important to point out that inflation had already been accelerating prior to russia's attack on ukraine. the global economy had rebounded unexpectedly quickly from the crisis brought about by the pandemic. existing supply chain disruptions and the strong surge in demand therefore led to supply bottlenecks. with the war and its repercussions, inflation picked up considerably. and across the board. this is reflected not least in the rise in core inflation rates. the annual hicp rate excluding energy and food in january stood at 5. 1 % in germany and 5. 3 % in the euro area. what the numbers show us is that underlying price pressures remain very high. although we also assume that the wave of inflation has peaked, we are expecting the inflation rate to fall only gradually. the ecb staff will publish its updated projections in two weeks'time. without wishing to pre - empt them, please allow me to make the following point : although the recent decline in energy prices will affect the short - term outlook, it will initially have no essential bearing on the medium - term projections. for germany, our experts are now assuming that we will end up with an average hicp inflation rate of between 6 % and 7 % in 2023. but in 2024 and possibly also in 2025, inflation rates ( including core inflation ) will still be well above the 2 % mark. one reason for this is that the government energy price brakes will be lifted, which will be associated with rebound effects of a comparable magnitude. another is that the higher - than - average wage increases are likely to feed increasingly into prices. at all events, inflation rates will not return to our target rate of 2 % in the euro area in a timely manner of their own accord. 3 monetary policy we therefore need a monetary policy in which action is decisive and the necessary steps are taken to restore price stability. just one year ago, ladies and gentlemen, european monetary policy was extraordinarily accommodative. the deposit facility rate stood at - 0. 5 % and the eurosystem was continuing to increase its asset holdings. then the turnaround occurred – a change of course in monetary policy such as had not been seen in a long time. at the end of march, net purchases under the pandemic emergency purchase programme ( pepp ) were discontinued ; three months later

business climate and consumer sentiment deteriorated massively. uncertainty began to spread : owing to surging consumer prices, for one thing, and to energy supply, for another. but private consumption still increased. this was thanks, first and foremost, to the catchup effects following the lifting of coronavirus restrictions. this easing boosted activity in consumer - related services sectors, in particular. exports and investment in machinery and equipment likewise supported economic growth over the past year. on the other hand, construction activity contracted as a result of higher financing costs, reduced household purchasing power and high construction prices. economic output exceeded its pre - pandemic levels for the first time in the summer. towards the end of the year, however, the positive effects from the lifting of the coronavirus mitigation measures tailed off. in addition, the global economy slowed down further. this put a damper on export demand. and, in particular, uncertainty surrounding energy supply and its costs weighed heavily on enterprises and households. the situation in the energy markets eased over the course of this winter half - year. on top of that, the feared gas shortage was successfully averted thanks to efforts to save energy as well as to mild temperatures. nevertheless, economic output in the final quarter of 2022 was still down by 0. 4 % on the quarter. german economic output is likely to contract in the first quarter of 2023, too. although there could be a gradual pick - up in the second quarter, there is still no sign of any major improvement for now. as before, our experts are not expecting there to be a visible economic recovery until the second half of the year. from today's vantage point, gross domestic product is likely to decline slightly for the full year, which would be less of a drop than projected in december, however. 2. 2 inflation 2022 will go down in germany's economic history as a year of one of the highest inflation rates since the foundation of the federal republic. as measured by the harmonised index of consumer prices ( hicp ), which is used for euro area monetary policy, the annual rate of inflation went up to 8. 7 %. over the course of the year, the hicp rate even hit double digits for a time. for the euro area as a whole, the average inflation rate for 2022 came in at 8. 4 %, by far the highest rate since the introduction of the euro. 2 / 7 bis - central bankers'speeches sharp rises in energy