having a dampening effect on demand – an intended effect, to be clear. but this will not necessarily lead to a recession. on the contrary : i am rather confident that we can avoid a hard landing. the ecb projection for growth in 2023 has been revised up to an average of 1. 0 %. economic activity will benefit from the decline in energy prices. and in 2024 and 2025, ecb staff expect growth to pick up further, to 1. 6 %. the imf projections are similar, by the way. the euro area labour market is robust ; the unemployment rate is at an all - time low. and the shortage of skilled labour is still very pronounced. hence, the risk of choking off the economy by tightening monetary conditions is rather limited. i am aware of kenneth rogoff's and carmen reinhart's misgivings about that phrase, but this time, i believe, is really different. in fact, it would harm the economy more if high inflation were to persist. in other words, if inflation is stubborn, we will just have to be even more stubborn. 4. 2 financial stability concerns the second argument put forward against further rate hikes concerns financial stability. some argue that the sharp increase in interest rates triggered the recent financial turmoil. if central banks were to tighten even more, so the argument goes, this would pose a threat to financial stability. while it is true that the rapid sequence of rate hikes has been a challenge for individual banks, it is a manageable risk. over the medium term, commercial banks even benefit from higher interest rates since they can widen their margins again, these having been compressed during the era of negative rates. in this respect, i do not see the specific problems of individual banks such as silicon valley bank or credit suisse as a symptom of a systemic crisis. the financial system as a whole has so far weathered the market turmoil. this is not to deny that decisive policy actions were necessary to contain its impact and that recent events have certainly highlighted risks within the financial sector. in particular, we have seen that risks can materialise from the interplay of 1. excessive maturity transformation, 2. a sudden materialisation of high unrealised losses, 3. low liquidity buffers, 4. a high share of uninsured deposits concentrated in the tech sector and 5. the combination of social media, digital - finance tools and nervous depositors. 4 / 7 bis - central

the global economy meeting ( gem ), which gathers at the bis headquarter in basel. over the past few years, this forum has included 31 governors as permanent members plus a number of other governors attending on a rotating basis. the gem, in which all systemic emerging economies ’ central bank governors are fully participating, has become the prime group for global governance among central banks. the gem has become a very important forum for assessing global economic and financial conditions, for analysing economic and financial policy issues of common interest to central banks. i have the privilege of chairing the gem presently, and must say that i find the candid exchange of views of our bi - monthly meetings of enormous value. strengthening institutions among the new and strengthened forums, i would like to highlight the expansion of the membership in the financial stability board ( fsb ), whose membership is now largely overlapping that of the g20. the fsb has received an enhanced mandate to strengthen the international financial architecture and global financial stability. collaborative efforts between the imf and the fsb in this context are currently underway, including a joint early warning exercise for the identification of risks to the global economy. the imf itself has overhauled its lending framework and introduced new instruments to assist countries in financial need, a first step in the broader discussion of its future mandate and internal governance. the meeting of the imfc, two days ago in washington, showed a confirmed determination to move ahead in this field. the crisis has also pointed to the need to enhance the framework for cooperation in financial regulation and supervision in europe. as a result, micro - prudential supervision will be reinforced with the creation of a european system of financial supervisors, including three new european supervisory authorities in banking, insurance and securities. moreover, micro - prudential supervision will be complemented by macro - prudential supervision, focusing on the prevention of systemic risk. the financial crisis has been revealing in many respects. it has revealed the scale of the potential fallout from the failure of large financial institutions. it has revealed the fragility of the financial system to features and trends that cut across institutions, markets and infrastructures. and it has illustrated the magnitude of the consequences of adverse feedback loop between the financial system and the real economy. all three elements i have just described are key features of systemic risk : first, contagion ; second, the build - up of financial imbalances and unsustainable trends within and across the various components of the financial