on central bank independence. independence grants central banks significant leeway in their actions. but it also requires central banks to be held accountable – a point that stefan ingves highlighted in a speech last year. [ 8 ] we need to justify the course of action that we consider as most appropriate in achieving our mandate. this is what i intend to do in my remarks today. i will argue that failing to arrest high inflation in a timely manner would jeopardise the green transition more fundamentally, and that a restrictive monetary policy stance today will benefit society over the medium to long run by restoring price stability. i will also stress that fiscal policy needs to remain in the driving seat and accelerate the green transition, and that the decline in the ecb ’ s balance sheet as part of our monetary policy tightening requires us to make additional efforts to align our actions with the objectives of the paris agreement. green transition can only thrive with price stability over the past year, we have moved forcefully to contain inflation by first stopping net asset purchases and then by raising our key policy rates by a cumulative two and a half percentage points. we have also announced that the eurosystem will no longer reinvest all of the principal payments from maturing securities in the asset purchase programme ( app ). we judge that interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to our 2 % medium - term target. as interest rates rise, financing investments in green technologies will become more expensive, generating the risk that higher costs of capital may slow down the pace of decarbonisation. there are, however, three interrelated reasons why tighter financing conditions are the appropriate response to the challenges we are facing today. first, current high inflation is a tax on investment. in many countries, it raises the user cost of capital by raising the effective tax rate on business investment. [ 9 ] high inflation also increases uncertainty and distorts relative price signals relevant for investment decisions. and it may slow down productivity growth, as occurred in the united states in the 1970s. therefore, the green transition would not thrive in a high inflation environment. price stability is a precondition for the sustainable transformation of our economy. second, inflation will not subside by itself. what started as a relative price shock has gradually morphed into a broad - based increase in the general price level. preliminary inflation data for december point to a persistent build - up of underlying price

european central bank : press conference – introductory statement introductory statement by mr jean - claude trichet, president of the european central bank and mr lucas papademos, vice - president of the european central bank, frankfurt am main, 5 june 2008. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. this week we celebrated the tenth anniversary of the ecb, marking an important milestone in the development of this institution and of the single monetary policy. on that occasion i expressed my sincere thanks to all those who have helped to build a solid foundation for the euro. let me also extend these thanks to you who play such an important role in transmitting our decisions and explanations to the financial markets and to the public at large. we will now report on the outcome of today ’ s meeting of the governing council, which was also attended by the president of the eurogroup, prime minister juncker. on the basis of our regular economic and monetary analyses, we decided at today ’ s meeting to leave the key ecb interest rates unchanged. at the same time, we noted that risks to price stability over the medium term have increased further. inflation rates have risen significantly since the autumn of last year, owing mainly to strong increases in energy and food prices. hicp inflation is now expected to remain high for a more protracted period than previously thought. upside risks to price stability over the medium term are also confirmed by the continuing very vigorous money and credit growth and the absence of significant constraints on bank loan supply up to now. at the same time, the economic fundamentals of the euro area are sound. against this background, we emphasise that maintaining price stability in the medium term is our primary objective in accordance with our mandate. the governing council is monitoring very closely all developments. it is in a state of heightened alertness. by acting in a firm and timely manner, we will prevent second - round effects and ensure that risks to price stability over the medium term do not materialise. it is our strong determination to secure a firm anchoring of medium and long - term inflation expectations in line with price stability. allow me to explain our assessment in greater detail, starting with the economic analysis. at a quarter - on - quarter rate of 0. 8 %, real gdp growth in the first quarter of 2008 was well above expectations. in part, this strength reflected temporary factors, notably the unusually mild winter in many parts of europe, which appears to