, stemming from energy and food prices, monetary policy attempts to re - align aggregate demand and aggregate supply so as to contain inflationary pressures. so, monetary policy has a more difficult job than when dealing with the typical demand driven inflationary pressures. therefore, it requires a balanced approach to contain cost - push inflation but avoid having an exacerbated negative effect on output and unemployment. in addition to the balance i mentioned before, monetary policy decisions have to deal with a lot of uncertainty. the risk of a wage - price increases spiral, even though not yet evidenced in the eurozone, would exacerbate inflationary pressures. if inflation expectations get de - anchored then inflation will persist for much longer. in such a case the pace of interest rate adjustment as well as the final rate level may have to increase. currently no material de - anchoring has been observed even though some measures indicate inflation expectations to be slightly above 2 per cent in medium term. 2 / 4 bis - central bankers'speeches there is also uncertainty surrounding geopolitical developments and the impact on the supply side if events on the ground worsen and they create further energy and commodity price shocks and disruptions. in such case, inflation and output would be worse than projected in 2023 and 2024. on the other hand, if there is an improvement in geopolitics, energy prices may fall as rapidly as they rose. therefore monetary policy has to act in the middle of a lot of uncertainty in a number of areas, hence monitoring and pacing is still very important. domestic economic developments let me now turn to domestic economic developments. the cyprus economy, continued to record noteworthy gdp growth, despite the outbreak of the war. real gdp growth in cyprus expanded by about 6 percent during the first half of 2022, mainly driven by a faster than expected recovery in tourism - related activities and, to a lesser extent, by growth in information and communication activities and in professional services. at the same time, weakness in the cyprus gdp performance could be expected to become visible towards the end of 2022 and the first half of 2023, primarily owing to the anticipated worsening in the international economic outlook, which also has an impact on the domestic developments. for 2023, gdp growth is expected to reach 2. 5 per cent. in terms of inflation, the harmonised index of consumer prices ( hicp ) reached 9 percent in september 2022 compared with 3. 6 percent in september 2021. the spike in the domestic inflation

energy prices. harmonized inflation in the euro - area rose to a high of 10 percent in september, up from 9. 1 percent in august, indicating a continuing rising trend. based on the september eurosystem staff broad 1 / 4 bis - central bankers'speeches macroeconomic projection exercise, both headline and core inflation are expected to be higher in 2022, at 8. 1 per cent and 3. 9 per cent, respectively. in fact core inflation is expected to be slightly above our inflation target by the end of the forecast horizon at 2. 3 per cent. energy price inflation remained extremely elevated at 40. 8 per cent in september and it continues to be the dominant component of overall inflation. marketbased indicators suggest that, in the near term, oil prices are likely to moderate, while wholesale gas prices will stay extraordinarily high. the relatively high import share of gas needed for the eu27 energy consumption, will create extensive challenges in the coming winter months, especially, in countries with gas - intensive industrial sectors. food price inflation also rose in september ( to 11. 8 per cent ), reflecting higher input costs related to energy, disruptions of trade in food commodities, and adverse weather conditions. while supply bottlenecks have been easing, these continue to gradually feed through to consumer prices and are putting further upward pressure on inflation, as is recovering demand in the services sector. the depreciation of the euro has also contributed to the rising inflationary pressures, together with the aforementioned supply and demand factors. monetary policy the ecb's primary objective is price stability, which is defined as keeping inflation at 2 % over the medium term. in response to these developments, in our september monetary policy meeting, the governing council of the ecb decided to raise policy rates by 75 basis points. this significant step frontloads the transition to normalise monetary policy towards levels that will enable the timely return of inflation to our two per cent medium - term target. unquestionably, the key current challenge, is to put under control excessive and persistent inflationary dynamics. monetary policy decisions, however, have to be considered and made within the following context : monetary policy takes roughly 18 months to affect the real economy as it is channelled through banks, households and firms and consequently impacts their decisions on credit, consumption and investment, respectively. therefore, monetary policy does not target current inflation but the medium term inflation outlook. at the current juncture that most of inflation is cost push