in particular senior management and equity holders, and possibly debt holders, pay a sufficient price for the rescue. this issue has been discussed at length in the literature, the bulk of which convincingly argues that moral hazard issues can be taken into account in a satisfactory way in the design of the rescue mechanism. so, to conclude on the moral hazard topic, i would say that, in order to draw meaningful conclusions, it is important to distinguish between the very different possible types of financial crisis management measures available to central banks. when assessing and choosing among these different measures, it is necessary to take into account the implications for both the central bank and for its counterparties, including the future incentives of the latter, in order to achieve, overall, the most efficient allocation of resources. separation of liquidity management and the monetary policy stance finally, a frequent focus of our communication during the turmoil has been the importance of distinguishing between interventions related to liquidity management and changes in monetary policy stance. it is very important for the public to understand that the implementation of technical measures related to liquidity management during the current turmoil has been completely separated from any considerations on the monetary policy stance. contrary to the occasional public perception, these operations have had no effect on the overall liquidity supply to the banking sector. overall, the amount of liquidity provided within the various maintenance periods since the start of the turmoil has remained unchanged. instead, the liquidity provision has been to some extent simply brought forward in time within each period, thereby simply representing a shift in the time path of liquidity supply within the reserve maintenance period. also, it is important to understand that the interest rates at which the fine - tuning operations and the supplementary longer term refinancing operations were settled contain no information on the future monetary policy stance, since the ecb acted as a rate taker in these operations. the need to understand the difference between technical liquidity provision measures and changes to the monetary policy stance is particularly important in the current environment, since the turmoil in money markets has occurred at a time of increasing concerns about rising inflationary pressures and deteriorating outlook for inflation. in this context, misunderstandings about the purpose of our liquidity interventions might adversely affect inflationary expectations. conclusion let me conclude by emphasising that the recent market developments have stressed the importance for policy - makers to have access to timely and accurate information on financial developments, and to set up mechanisms that facilitate the smooth and rapid exchange of information among market participants, central banks and other

inflation expectations rise, interest rates should rise to control demand and inflation. our approach : we kept interest rates stable ; the repo rate remained at 7 %. this approach was controversial and contrary to the mainstream opinion of economists in the czech republic. this strategy was based on two main arguments : ( 1 ) we concluded that inflation expectations are adaptive, and therefore ex ante real rates would rise once inflation falls. we expected inflation would peak soon, as supply shocks were not repeated and inflation momentum was declining. ( 2 ) we observed a sharp decline in household consumption, a contraction in lending and a slowdown in money supply growth ( m2 ). expected and perceived inflation are highly correlated expected inflation is closely related to perceived inflation, with correlation coefficients ranging from 0. 4 to 0. 74 in different years. this suggests that inflation expectations were / are adaptive. in addition, they are not a reliable predictor of future inflation. consumption was falling despite elevated inflation expectations we carefully analysed consumption trends, which typically reflect demand pressures in the economy. despite high inflation expectations, consumption fell sharply. household consumption across eu countries ( index, 2019 = 100 ) czech republic source : eurostat this contradicts economic theory : higher inflation expectations ⇒ people consume more now because they expect prices to rise in the future household consumption fell sharply for the following reasons : § § a sharp decline in real disposable income high savings rates, influenced by economic uncertainty ( precautionary savings ) and restrictive monetary policy our approach to monetary policy in times of elevated inflation expectations to summarise our strategy for taming inflation : we decided to keep nominal interest rates stable at 7 % from july 2022 to december 2023. we focused on maintaining a strong exchange rate ( through verbal intervention ), which reached an all - time high against the euro in spring 2023, making imports cheaper. in addition, the strong exchange rate tightened monetary conditions for domestic exporters who had taken on loans in euros. inflation peaked in october 2022. inflation expectations also started to fall ( due to their adaptive nature ) and ex ante real interest rates started to rise, although nominal rates were stable. together, positive real interest rates and the exchange rate resulted in the tightest monetary conditions. lending activity fell sharply and money supply ( m2 ) eased. the monetary overhang disappeared over time. we also focused on communication : § we emphasised that inflation momentum was declining, although annual inflation was still high1 for example, https :