prices, supply bottlenecks and the post - pandemic recovery in demand have fuelled broad pressure on prices and driven up inflation. the depreciation of the euro has also added to the build - up of inflationary pressures. the annual rate of change in energy prices reached almost 42 % in october, likely driven by strong increases in consumer electricity and gas prices. total food inflation also recorded yet another sizeable increase, slightly above 13 % in october. 1 / 4 bis - central bankers'speeches accumulated cost pressures over the last year have continued to drive up processed food prices, while the drought in summer and the elevated fertiliser prices over the past year are largely responsible for the rise in unprocessed food prices. the increase in core inflation, now at 5 %, was accounted for by both its main components : inflation in services and non - energy industrial goods. price pressures are evident in more and more sectors, owing partly to the impact of high energy costs feeding through to the whole economy. in fact, over half the items in the harmonised index of consumer prices have recorded inflation rates above 4 %. persistent high inflation might induce higher than anticipated wage rises, or a rise in inflation expectations above our target. the current robustness in labour markets and some catch - up to compensate for higher inflation are likely to support wage growth. indeed, incoming wage data and recent wage agreements indicate that wage dynamics may be picking up, which warrants continued monitoring. however, to date, inflation expectations have remained anchored. most measures of longer - term inflation expectations currently stand at around 2 %, although we are attentive to recent abovetarget revisions to certain indicators. monetary policy decisions to support a timely return of inflation to 2 %, our monetary policy aims to reduce support for demand and to ensure inflation expectations remain anchored at our medium - term target. accordingly, we decided to raise the three key ecb interest rates by 75 basis points in october – the third major rate hike in a row – and we expect to raise interest rates again. we also changed the terms and conditions of the third series of targeted longer - term refinancing operations. the tltro iii programme addressed the need for significant stimulus during the pandemic, strengthening the transmission of rates to the economy via banks. but now the environment has changed completely – and we need to ensure that the lower cost of tltro funding does not impede monetary transmission when policy needs to be normalised

by acting as the principal intermediary between savers and borrowers, the banking system plays a role similar to the electricity supply network as a vital part of the economic infrastructure. however, as recent experience has shown, if the stability of the system is undermined, considerable disruption can ensue, leading to considerable effects on social and economic costs. for these reasons, financial stability may be seen as a “ public good ” which requires adequate regulation. regulators need to tread a careful path between controls that ensure the stability of the financial system and over - bearing regulation, which would hinder competition and efficiency. the new regulatory reform and the macro - prudential oversight now in place constitute an unprecedented achievement. at the same time, key challenges remain, in particular regarding the interaction between macro - prudential and micro - prudential authorities, especially against a background of growing inter - connectedness of financial markets and the sovereign debt crisis. looking forward, the coming years will be crucial to judge the functioning of the new financial supervision framework, to assess the efficiency of the new tools and methodologies that are being developed as academic research progresses in this field, and to minimise and correct potential inefficiencies. the achievements made so far are clearly a major step towards creating a safer financial system, but further ambitious arrangements may be needed to enhance the robustness of our financial systems. not only stricter fiscal rules and the creation of a fiscal union are needed, but it has to be complemented with a financial union. thank you for your attention. bis central bankers ’ speeches