area. as a member of the eurosystem however, the banco de espana remains deeply involved in such discussions. in other realms, relations with the spanish authorities remain on a bilateral footing, as is notably the case with the close contact each year on the occasion of the analysis of the spanish economy via the article iv report. that said, the european dimension is becoming increasingly important. beyond the single monetary policy, there are various areas of european co - ordination in imf - related matters although, as is well known, the different european states are represented on an individual basis in the bretton woods institutions. spain, which adhered to the new arrangements to borrow ( nab ) as from their creation in 1998, is today an imf creditor country. and though we continue to benefit from the fund ’ s excellent technical advice, we also provide technical assistance, in some cases in collaboration with the fund, to other countries in the process of implementing systems or procedures in which we have a certain comparative advantage. moreover, the spanish authorities and, in particular, the banco de espana, co - operate increasingly closely with the fund on matters relating to national and international financial stability. as i indicated earlier, this issue is becoming more and more important, and the objectives and the interests of the fund tend to coincide in this connection with those of the competent national authorities. the reasons why national and international authorities pay greater attention to financial stability can be found in the crises a significant number of countries have undergone in recent years. these have highlighted the complex linkages between the real sector and the financial sector and the risk that the latter may not only be a source of instability, but also amplify the imbalances or shocks generated in other sectors of the economy. the links between exchange rate crises and banking crises - the so - called twin crises - and the feedback mechanisms between the two are, along with the propagation and contagion channels from one country to another, matters of particular importance here. national regulators and supervisors, in addition to their initial aim of safeguarding the solvency of individual institutions, have given increasing importance to combining the presence of flexible, efficient financial markets and intermediaries with the absence of excessive volatility on financial markets and to prevent the so - called systemic risks - which affect the whole of the financial system - from materialising. international financial institutions have also become increasingly oriented towards the need to ensure a proper functioning of international financial markets and to limit the transmission of shocks from one

however on the assumption that firms ’ and workers ’ long - run inflation expectations remain anchored at all times to the central bank ’ s target, as they fully trust the central bank ’ s commitment to eventually bring inflation back to target. in this respect, recent research shows that, when agents longer - run inflation expectations are endogenous to the inflation environment they experience, then in a context of high and see m. obstfeld and h. zhou, “ the global dollar cycle. brookings papers on economic activity, bpea conference drafts, 2022. see, for instance, gali, j. “ monetary policy, inflation, and the business cycle ” princeton university press, 2008. models including more realistic characterisations of oil or gas markets offer conceptually similar responses, as in for instance, nakov, a., and a. pescatori “ monetary policy trade - offs with a dominant oil producer ”, journal of money, credit and banking, 42 : 1 - 32, 2010. persistent inflation such expectations can become highly sensitive to deviations of realised inflation from their own forecast. 8 thus, an adequate monetary policy conduct should take into account the risk of de - anchoring by moving the interest rate more aggressively than in the absence of such a risk. 9 the optimal monetary policy then involves a strong response to movements in agents ’ long - run inflation expectation. this strong response ensures that whenever the public is surprised by inflation in the wake of recent events, and expectations start to de - anchor, the central bank does not allow them to drift above the medium - term anchor persistently. in sum, the medium - term orientation of our inflation target recognises both the imperfect control of inflation by monetary policy in the short run, owing to the variable transmission lags to the economy and inflation, and the fact that certain kinds of shocks may create a temporary trade - off between inflation and economic activity, as in the case of cost - push shocks. the medium - term orientation provides the policy flexibility to assess the origin of shocks and look through temporary shocks that may dissipate of their own accord. by following this medium - term orientation, the ecb avoids unnecessary volatility in activity and employment. importantly, the medium - term orientation does not imply that central banks should ignore short - run inflation developments. instead, it implies that the latest inflation data matter insofar as they contain information regarding medium - term inflationary pressures. by its very nature, the medium -