luis de guindos : monetary policy, financial stability and mediumterm growth in the euro area speech by mr luis de guindos, vice - president of the european central bank, at the 8th annual conference of mediterranean central banks, organised by the croatian national bank, the bank of spain, the oecd, the iemed, and the ufm, split, 14 february 2024. * * * over the past few years the euro area economy has experienced unprecedented shocks that created exceptional uncertainty and drove inflation to record highs. in response to these inflationary pressures, we embarked on the most forceful rate hiking cycle in the history of the euro. credibility – very much the focus of today's conference – is a key central bank asset that becomes even more important in times of high uncertainty. our policy measures are making a substantial contribution to reducing inflation, demonstrating our commitment to ensuring that inflation returns to our two per cent medium - term target in a timely manner. in my remarks today, i will first review the state of the euro area economy and our latest monetary policy decisions. i will then turn to financial stability considerations, before concluding with some thoughts on why action to support the euro area economy is also needed from other policy actors. economic outlook and monetary policy our interest rate decisions are guided by three considerations : first, the inflation outlook in light of incoming economic and financial data ; second, the dynamics of underlying inflation ; and third, the transmission of our monetary policy to financing conditions and the real economy. starting with our first criterion, incoming information has broadly confirmed the mediumterm outlook from our december macroeconomic projections. economic activity is likely to have stagnated in the fourth quarter of 2023 and incoming data continue to signal weakness in the near term. at the same time, some forward - looking survey indicators point to a pick - up in growth further ahead. although headline inflation increased in december to just below 3 %, on account of energy base effects reflecting impacts from the fiscal measures a year ago, the rebound was somewhat weaker than expected. aside from energy, all the main components of inflation fell or remained unchanged. meanwhile, headline inflation declined again in january. this means that the disinflationary process is continuing. we also expect inflation to ease further over the course of this year amid the fading impact of past energy shocks, supply bottlenecks and the post - pandemic reopening of the economy, and as tight financing conditions continue to weigh on demand.

about the ranking of creditors and the procedures that would be followed in the case of a bank resolution. if we are successful in establishing an effective banking union – as i am convinced we will be – the benefits will be large, not only for euro area countries but for all eu members. a more stable union will be one where financial contagion will have disappeared, where business for the financial centres will vastly increase, where financial market integration will resume. a stable union, however, is not only about building new rules and procedures but also about applying existing ones. in the past, credibility of european procedures has at times been weakened because they were not followed with sufficient rigour. it is now important that existing and new rules be applied in a steadfast manner. conclusion let me draw to a close. bis central bankers ’ speeches today we need to focus on securing economic stability and prosperity for the people of europe. with so many young europeans feeling deprived of the opportunities and the prospects enjoyed by previous generations, the urgency of advancing this vision has never been greater. after a deep financial and economic crisis, we now see the restart of the european process, building on the agreement of the june 2012 summit. this process ultimately entails some transfer of national sovereignty in the areas of budget and structural policies. and the efforts made by germany and france in this regard are particularly encouraging. last summer, speaking here in london, i said that “ [ w ] hen people talk about the fragility of the euro, [ they ] underestimate the amount of political capital that is being invested in [ it ] ”. since then, even more political capital has been mobilised. the answer to the crisis has not been less europe but more europe. the ecb, as an institution at the frontier of european integration, has played an active role in addressing the crisis. the credibility of the ecb ’ s steadfast commitment to its primary objective is unshaken in the eyes of both the markets and the people of europe. and this is because our credentials in preserving price stability have been tested both when risks were on the upside and when markets driven by panic were threatening to send the economy in a downward spiral. this is a time when the strength of all our institutions is being tested ; first, by the financial crisis, then by the recession. the european union and the european monetary union are no exceptions. the choice is between adapting them to the new conditions or do nothing and risk their dissolution. these