speech challenges for monetary policy remarks by luis de guindos, vice - president of the ecb, at the frankfurt euro finance summit frankfurt am main, 4 july 2022 having participated in the previous two summits, it is a great pleasure to speak with you again this year. in my remarks today, i will first discuss the economic outlook for the euro area. i will then turn to the ecb ’ s recent monetary policy decisions and look at why an even transmission of our monetary policy is vital to the achievement of our price stability mandate. the euro area economic outlook over the first half of this year, euro area inflation has continued to rise and has reached undesirably high levels. in june headline inflation rose to 8. 6 %, another record high, continuing to reflect surging energy and food prices, owing in part to russia ’ s unjustified invasion of ukraine. but price increases have not been limited to energy and food. in recent months we have seen inflationary pressures broaden and intensify across many goods and services. elevated inflation will remain with us for some time, declining to just above target only at the end of our projection horizon. we expect that moderating energy costs, the easing of supply disruptions related to the pandemic and the normalisation of monetary policy will be conducive to inflation returning to our 2 % target over the medium term. but the risks surrounding inflation are on the upside. economic activity is in turn affected by the war and its consequences. rising prices are reducing disposable incomes, while intensified supply disruptions and greater uncertainty are also weighing on growth, particularly in the manufacturing sector. at the same time, developments in the services sector are supporting growth, with the lifting of pandemic - related restrictions and signs of a buoyant summer tourism season boosting activity. these developments are bolstering incomes and consumption, helping an already strong labour market to withstand the economic impact of the war. our projections foresee growth above 2 % throughout the projection horizon. but the war and the risk of further disruption in the energy supply to the euro area continues to be a significant downside risk to growth. in fact, the downside scenario in our june projections reflects this risk and implies a contraction of activity in 2023, following weaker but positive growth in 2022. while we are still expecting positive growth rates throughout our projection horizon, in the coming months we will have to navigate this challenging combination of shocks which

growth throughout the recovery. various indicators suggest this cycle has not been disrupted by the loss of growth momentum this year. employment growth remains relatively strong, even though the latest data suggest some slowdown. the contribution of labour income to household income growth in the first half of this year was the strongest in a decade. and consumer confidence remains above its long - run average in the euro area and across most economies. perceptions about the general economic climate have declined somewhat this year, but consumers ’ assessments of their personal situation – which tend to be more correlated with consumption – have remained steady. there are three considerations that underpin our view that this cycle is resilient. first, an important force behind employment growth in the euro area is longer - term structural changes, and these are less sensitive to cyclical swings. over the past five years, employment has increased by 9. 5 million people, rising by 2. 6 million in germany, 2. 1 million in spain, 1 million in france and 1 million in italy. 2 this growth is similar to the five years before the crisis, when employment grew by 10 million people. in that period, however, close to 70 % of employment growth was “ prime age ”, meaning it came from the 25 - 54 age group. but since 2013 more than 70 % of employment growth has come from those aged 5574. this partly reflects the impact of past structural reforms, such as to pension systems. indeed, the participation rate of people aged 55 - 74 has almost doubled, from around 20 % in 1999 to 38 % in 2017. the share of women in work has also risen by more than 10 percentage points since the start of emu to almost 60 % – its highest level ever. in addition, countries that have implemented structural reforms have in general seen a rise in labour demand in recent years compared with the pre - crisis period. germany, portugal and spain are all good examples. 2 / 6 bis central bankers'speeches the second consideration that points to the resilience of domestic demand is the strong link between consumption and job growth in the euro area. consumption is much more conducive to jobs than exports, reflecting the higher labour - intensity of services, which are the bulk of consumers ’ expenditure. in contrast, exports have a higher manufacturing content and are less labour intensive. 3 this is one reason why the labour market recovery was not affected by the contraction in world trade in 2015 - 16. in fact, the continued strength of consumption may