##estimated in all eurosystem projections since mid - 2020. and upside risks clearly predominate at the moment. first, tensions in energy markets could persist for longer than assumed in the forecasts. second, the still high commodity prices could be passed on to consumers to a greater extent than is usually the case. and third, wages could rise more strongly than expected, partly in response to inflation surprises. 3 monetary policy in view of these price developments and the outlook for inflation, the ecb governing council is acting decisively. we have taken the first steps towards normalising monetary policy. in our july meeting, we set the interest rate reversal in motion. we raised key interest rates by 0. 5 percentage point and brought the chapter of negative deposit rates to a close. in september and october, we followed this up with larger interest rate hikes of 0. 75 percentage point each. and in december, we will certainly be following up with a further interest rate increase to bring the inflation rate back to 2 % in the medium term. 3 / 5 bis - central bankers'speeches the size of each interest rate step and how high we will raise the rates will depend on how the data and outlook develop. as things currently stand, i still believe that decisive action is warranted – without wishing to call for an interest rate step of any particular size. however, monetary policy normalisation is about more than just raising key interest rates. at its next meeting, the governing council will also discuss the ecb's large bond holdings. in my view, there is much to be said for no longer replacing all maturing bonds, starting next year. this would underscore our commitment to ensuring that inflation returns to the medium - term target of 2 % in a timely manner. it would also send out another clear message from the governing council about combating inflation. however, the governing council is sometimes accused of raising interest rates irrespective of economic developments and thus exacerbating the economic weakness in the euro area. on this question, we need to bear in mind why we are experiencing a slowdown in economic activity : the culprits are the supply bottlenecks caused by the pandemic and the war. the ifo institute illustrated this well : the munich experts expect the german economy to suffer drastic real income losses as a result of rising gas and oil prices. they put these losses at a total of €64 billion for this year alone, which corresponds to just

were to happen, we would be faced with a recession. its scale would depend on many uncertain factors. these include households'gas consumption, temperatures and the effect of policy measures. one thing is for sure : gas shortages would amplify downward forces. the european commission is expecting the german economy to shrink next year, with a decline of 0. 6 % anticipated by experts. projecting growth of - 0. 2 %, the german council of experts is somewhat more optimistic. 2 / 5 bis - central bankers'speeches the inflation rate in germany is far too high. it rose further in october to reach 11. 6 %, hitting its highest level in more than 70 years. inflation as measured by the hicp is expected to be above 8. 5 % in 2022. this is largely due to the russian war of aggression against ukraine and its consequences. however, inflation was already on a strong upward trajectory even before the war broke out, what with the global economy recovering unexpectedly quickly from the coronavirus crisis. supply wasn't always able to keep up, and supply chains were disrupted. inflation in germany will probably remain high next year, too. i believe it is likely that, on an annual average, we'll see a seven before the decimal point. and the risks are clearly tilted to the upside given the tensions in energy markets. as for the euro area, the impact of the energy crisis will likely be less pronounced than it will be on germany. which is why the european commission is expecting economic output in the euro area to still increase slightly in 2023, in contrast to germany. economic activity in the euro area, too, is being hampered not only by tensions in the energy market but also by high inflation. the substantial upward pressure on prices is broad - based. it is dragging on private consumption, in particular. this year, consumer prices in the euro area have risen time and again at rates not seen since the introduction of the euro. at 10. 6 %, the october rate was the sixth all - time high in a row. core inflation stood at 5. 0 % in the same month. and for the next two years, the inflation forecast last published by the european commission provides figures that are noticeably above our medium - term inflation target of 2 %, namely 6. 1 % for 2023 and 2. 6 % for 2024. however, the forecasts should be interpreted with caution, as the outlook is highly uncertain at present. price dynamics have been under