of inflation at 1. 7 percent should be viewed as both a success and a wake - up call. we cannot be complacent. a policy - rate path that remains too restrictive for too long could induce an undershooting of our inflation target over the medium term and impede growth. should that occur, we would risk damaging our credibility. after all, credibility can be damaged by both overshooting and undershooting inflation objectives. in an environment of high uncertainty, a prolonged period of stagnation and weak investment could have lasting consequences for inflation. our task going forward is to chart a rate path that removes additional layers of restriction so that the recovery is enhanced. although i have focused on monetary policy, in my view, the contributions of fiscal and structural policies to macroeconomic stability are equally important. furthermore, 5 / 7 bis - central bankers'speeches completing the banking union and the capital markets union ( cmu ) is crucial to mobilising the investments needed to promote growth and employment. a single market for capital will enhance the european union's ( eu's ) productivity and competitiveness and increase the euro area's supply capacity and autonomy while supporting mediumterm price stability and economic welfare. finally, i would like to highlight the following factors, which, in my view, explain the success of the ecb's monetary policy so far in bringing inflation towards its 2 - percent target amid a series of shocks, which started with the pandemic and continued with the war in ukraine : first, the institutional independence of the ecb and the national central banks comprising the eurosystem. second, a commitment to the 2 - percent inflation target, using key interest rates as the primary policy tool, supplemented with non - standard measures when required by macroeconomic and monetary conditions. third, a pragmatic, flexible and gradual approach in an environment of heightened uncertainty. fourth, clear and effective communications from the ecb. in a world prone to supply disruptions and susceptible to geopolitical and political uncertainties, monetary policy needs to remain an anchor of stability and confidence. in my view, the ecb has performed efficiently - and credibly - in bringing down inflation in a timely manner while avoiding a recession. we will continue to be data - dependent, assessing all incoming information at each of our forthcoming monetary - policy meetings. we stand ready to proceed with further policy easing in a stepwise approach as warranted in order to safeguard a stable macroeconomic

likely to become larger, more frequent and possibly more persistent amid rising political uncertainty, geoeconomic fragmentation, a possible tariff war and climate change. these driving factors reinforce each other and have non - linear effects on inflation and output. central bankers need to timely assess whether such supply - side price shocks are transitory or more permanent entailing a risk of de - anchoring inflation expectations. to this end, we need to collect more granular data and develop further our analytical tools to deepen our understanding of both the characteristics of the price shock and the complexities of the environment in which it occurs. the recent high - inflation episode is a good example. first, it has shown that commodities that are critical for production and more upstream along the supply chain are likely to create larger shifts in relative sectoral prices and spill over to core inflation. second, a combination of different types of supply and demand shocks amid structural transformations of the economies can blur the assessment of the impact of a commodity price shock on inflation and output, complicating monetary policy. one lesson from the recent experience of the post - pandemic surge of inflation is that existing models failed to predict it. central banks need to develop new tools which are able to identify the nature of the shock ( supply vs demand ) in real time and assess its implications for inflation. to this end, the bank of greece is developing forecasting models of inflation based on textual indicators of supply and demand disturbances in commodity markets from news articles of reuters and dow jones. 3 with the help of ai, these indicators can be updated on a daily basis and help predict inflation more accurately. preliminary findings of this research project, suggest that these indicators provide distinct information about future inflation movements relative to existing predictors, inflation expectations and survey forecasts. overall, they reduce out - of - sample inflation forecast errors by up to 30 percent. for energy - importing economies, like greece, the nature of energy price shocks, either supply - or demand - driven, is less relevant when assessing their overall economic impact. in particular, research shows that in european economies both types of global energy price shocks tend to influence wages similarly, with largely short - lived and transitory effects. 4 the most pivotal factors in driving inflation sharply upward during the recent inflation episode were the size and persistence of the energy price shock rather than its nature. the large and sustained shock necessitated a forceful monetary policy tightening cycle to curb inflation. domestic structural factors largely shape the transmission of commodity price changes to