ecb ’ s institutional structure also facilitates transparent policy - making and the communication of policy decisions to the general public and financial markets. that this communication has been successful is supported by some evidence suggesting that the ecb ’ s focus on a quantitative definition of price stability has influenced price and wage setters in the euro area. although prices tend to move very sluggishly in the euro area compared to, say, the us, inflationary shocks dissipate at a similar rate to the us – the extra rigidity in the euro area is offset by the benefits of the effectiveness of monetary policy in anchoring euro area inflationary expectations16. so what does the foregoing analysis imply for policy prescriptions now? as inflation expectations appear to be appropriately anchored, it may be tempting for policy - makers to follow an accommodative monetary policy, riding the back of increased credibility. however, an accommodative monetary policy would not be a prudent prescription since the inflation expectations of economic agents may rise, ending the period of low inflation expectations. indeed, if inflation expectations depend not only on current inflation, but also on average inflation in an earlier, higher inflation, regime, a large and persistent shock, such as a negative energy supply shock may well lead economic agents to raise their expectations that the monetary authority will shift to a higher inflation regime17. the credibility that monetary authorities have gained so far must not be jeopardized by loosening the tolerable inflation range. a credible central bank can help stabilize the economy during this oil shock without moving to a higher inflation target. indeed, the credible central bank can take advantage of its credibility during an oil price shock because it faces less of a trade off between inflation and output than a less credible central bank. this situation enables the credible central bank to counter the shock through a smaller tightening of monetary policy than would otherwise be the case because the dynamics of inflation due to expectations are self - contained18. in the specific case of the ecb, credibility and well - anchored inflationary expectations have allowed monetary policy to be quite accommodating despite actual inflation at or above 2 % for more than two years. more recently, however, there have been potential upside risks to inflation stemming from both real economic and monetary developments. as a consequence, the ecb has acted to preempt any unfolding of these upside risks by withdrawing monetary accommodation. this circumstance underlies the rising rates in the euro area during the past year.

on four challenges and how they can be overcome : the first is understanding digital finance fundamentals. in order to formulate policy and fulfil our supervisory and regulatory mandate, we need to fully grasp the intricacies of digital finance and the way it affects business models and risk profiles. this requires knowledge, experience and talent. innovation facilitators, such as innovation hubs and regulatory sandboxes, help towards building the relevant capacity. it is important to promote collaboration among those facilitators in order to reap greater benefits. two great examples in this area are the european forum for innovation facilitators and the global financial innovation network, which have contributed to information sharing on the regulatory treatment of digital finance innovations and set up frameworks for the crossborder testing of such services. second, we need to address regulatory gaps. crypto assets and decentralised finance, artificial intelligence, as well as cyber threats, have highlighted the limitations in the existing regulatory framework. in certain cases legislation is fragmented ; in other cases there are outright regulatory gaps. for example, stablecoins, which could play an important role in the future of finance, have the potential to be all but " stable " unless appropriate regulation is in place. in order to overcome the above challenges, we need to adapt our supervisory and regulatory stance. the european commission initiatives for the digital operational resilience act, and the market in crypto assets regulation, are prime examples of regulatory reform aiming to tackle this issue. other jurisdictions have engaged 3 / 4 bis - central bankers'speeches in similar activities. the oversight of cross - border entities will require intensified monitoring and cooperation at international level. allocating resources to this effort is crucial. third, we need to alleviate obstacles to financial market growth. we can address this challenge by supporting the smooth integration of digital finance into the economy in sustainable ways. facilitating the establishment of fintech ecosystems at national and international level is key. authorities are already pursuing this objective, especially in asia. this will create network effects and encourage investments and successful partnerships. removing obstacles to cross - border payments, as highlighted by the financial stability board, promoting targeted government actions in our jurisdictions and fostering transition to " green " digital services will also be key activities to overcome this challenge. last but not least, we need to overcome our own efficiency and adaptability limitations, to keep abreast with all the technological advances in the market. to do this, we need to increase our own