speech challenges for monetary policy remarks by luis de guindos, vice - president of the ecb, at the frankfurt euro finance summit frankfurt am main, 4 july 2022 having participated in the previous two summits, it is a great pleasure to speak with you again this year. in my remarks today, i will first discuss the economic outlook for the euro area. i will then turn to the ecb ’ s recent monetary policy decisions and look at why an even transmission of our monetary policy is vital to the achievement of our price stability mandate. the euro area economic outlook over the first half of this year, euro area inflation has continued to rise and has reached undesirably high levels. in june headline inflation rose to 8. 6 %, another record high, continuing to reflect surging energy and food prices, owing in part to russia ’ s unjustified invasion of ukraine. but price increases have not been limited to energy and food. in recent months we have seen inflationary pressures broaden and intensify across many goods and services. elevated inflation will remain with us for some time, declining to just above target only at the end of our projection horizon. we expect that moderating energy costs, the easing of supply disruptions related to the pandemic and the normalisation of monetary policy will be conducive to inflation returning to our 2 % target over the medium term. but the risks surrounding inflation are on the upside. economic activity is in turn affected by the war and its consequences. rising prices are reducing disposable incomes, while intensified supply disruptions and greater uncertainty are also weighing on growth, particularly in the manufacturing sector. at the same time, developments in the services sector are supporting growth, with the lifting of pandemic - related restrictions and signs of a buoyant summer tourism season boosting activity. these developments are bolstering incomes and consumption, helping an already strong labour market to withstand the economic impact of the war. our projections foresee growth above 2 % throughout the projection horizon. but the war and the risk of further disruption in the energy supply to the euro area continues to be a significant downside risk to growth. in fact, the downside scenario in our june projections reflects this risk and implies a contraction of activity in 2023, following weaker but positive growth in 2022. while we are still expecting positive growth rates throughout our projection horizon, in the coming months we will have to navigate this challenging combination of shocks which

in the last two years. securities designed to finance green and social projects, which account for the majority of the market, have seen a particularly strong increase. - over the same period, sustainability - linked bonds recorded the highest growth rate. however, the relevance of these instruments in the overall debt securities market remains minor. another interesting aspect highlighted by these experimental indicators is holdings. since the beginning of 2021, euro area holdings of sustainable debt securities have grown continuously, following a similar trend to the one observed for euro area issuances. these instruments are becoming increasingly relevant investment alternatives but overall remain a minor portfolio item. challenges we have several sources and data providers to shed light on the evolution of sustainable finance instruments, but what exactly is a sustainable bond market? the information presented above provides an overview of euro area residents ’ issuances and holdings of debt instruments with sustainability characteristics. these indicators provide information on the proceeds raised to finance sustainable projects. in the case of green bonds, they are identified as “ debt securities where the proceeds are used to finance projects with clear environmental benefits ” and various sources are used to gain a broader picture. since debt securities are considered sustainable if they are at least labelled as such by their issuers ( i. e. self - labelled ), in addition to the information provided by data providers, the loosest level of assurance is relied upon. the ecb notes that remaining limitations are mostly due to the lack of internationally accepted harmonised definitions of certain concepts. 2 in recent years, financial market initiatives have moved ahead of legislation and several private providers have developed labels to identify green bonds and other sustainabilityrelated bonds, for example, the international capital market association and the climate bonds initiative. however, this does not mean that there is a single definition. in the european union, the european commission has been working over the last few years on the development of a european green bonds standard in order to establish uniform requirements for issuers of this type of bond. the main characteristics proposed by the european commission are : - taxonomy alignment : meaning that the funds raised by the bond should be allocated to projects that are aligned with the eu taxonomy. - transparency as to how bond proceeds are allocated, through detailed reporting requirements. - external review : all european green bonds must be checked by an external reviewer to ensure compliance with regulations and taxonomy alignment of the funded projects, and, see ecb ( 2023 ). towards climate - related statistical indicators. statistics committee of the european system of central banks. january