and revenue enhancement are expected in the coming years as a result of merger synergies and the improved macro environment. synergies are expected to raise the efficiency of greek banks to levels comparable to european peers. the rebound of economic activity will improve revenues and the quality of banks ’ balance sheets. challenges ahead the positive developments outlined above must not make us complacent. the banking sector still faces significant challenges, with the most significant one being the accumulation of non - performing loans. this, makes banks reluctant to extend new credit, deprives them of income that could otherwise be recycled into new loans and forces them to tie up more capital for future loan - loss provisions. the resolution of the challenges surrounding non - performing loans has two preconditions. bis central bankers ’ speeches first, the economy has to return to a positive growth path and falling unemployment that, in their turn, will improve the repayment ability of borrowers. second, a framework has to be put in place at the level of individual banks to ensure a more pro - active management of non - performing loans. emphasis should be placed, on the one hand, on the alleviation of the burden on borrowers facing temporary difficulties in servicing their debts and, on the other hand, the finding of a more permanent solution to loans which are unlikely ever to be fully repaid. such a strategy will not only help individual borrowers, but in the long term will unlock funds for the financing of the economy. to this end, two important developments have taken place. the government has established the government council for private debt management. the bank of greece has prepared a framework of supervisory requirements for banks ’ npl management, as well as a code of conduct for the management of private sector arrears. both have laid the ground for the creation of a mechanism for resolving the issue of non - performing loans. banks, for their part, must continue undertaking the necessary organizational actions to enhance the operating units that deal with these loans. they also need to continue implementing value - enhancing, capital - enhancing and fundingenhancing strategies in light of the latest stress test, the basel iii requirements and the slow pick - up in deposits. at the same time they face pressures to reduce their reliance on eurosystem refinancing and are due to face pressures relating to the change in ecb collateral rules in early 2015. up until now, the only sector in the economy to have undergone radical restructuring is the banking sector.

to their pre - pandemic pace, as supply bottlenecks have eased. outside of housing, core services inflation is also close to its pre - pandemic pace. housing services inflation continues to decline, but sluggishly. the growth rate in rents charged to new tenants remains low. as long as that remains the case, housing services inflation will continue to decline. 1 / 2 bis - central bankers'speeches broader economic conditions also set the table for further disinflation. the labor market is now roughly in balance. longer - run inflation expectations remain well anchored. monetary policy over the past year, we have continued to see solid growth and healthy gains in the labor force and productivity. our goal all along has been to restore price stability without the kind of painful rise in unemployment that has frequently accompanied efforts to bring down high inflation. that would be a highly desirable result for the communities, families, and businesses we serve. while the task is not complete, we have made a good deal of progress toward that outcome. for much of the past three years, inflation ran well above our goal, and the labor market was extremely tight. appropriately, our focus was on bringing down inflation. by keeping monetary policy restrictive, we helped restore the balance between overall supply and demand in the economy. that patient approach has paid dividends : inflation is now much closer to our 2 percent objective. today, we see the risks to achieving our employment and inflation goals as roughly in balance. our policy rate had been at a two - decade high since the july 2023 meeting. at the time of that meeting, core inflation was above 4 percent, well above our target, and unemployment was 3. 5 percent, near a 50 - year low. in the 14 months since, inflation has moved down, and unemployment has moved up, in both cases significantly. it was time for a recalibration of our policy stance to reflect progress toward our goals as well as the changed balance of risks. as i mentioned, our decision to reduce our policy rate by 50 basis points reflects our growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate economic growth and inflation moving sustainably down to 2 percent. looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. but we are not on any preset course. the risks are two - sided, and we will