year high now for the eurozone. my second question would be on the market expectation about the rate hike. economists were saying that the market has not fully absorbed your new forward guidance. perhaps you can tell us more about it and why the market is wrong to expect a rate hike already by next year. lagarde : thank you very much. actually, we talked about inflation, inflation, inflation. that has been a topic that has occupied a lot of our time and a lot of our debates. we went i think in - depth into analysing the factors that are driving inflation. we looked at, obviously, what is happening now, which is clearly of concern, particularly to citizens of europe, but we also looked at the medium - term outlook that we have. i think i would summarise those factors driving inflation, as we see it at the moment, in two key categories. one is related to pandemic and recovery, and the other one is related to energy. if you look at the one that is related to recovery and the postpandemic period, we are seeing shortages. we ’ re seeing shortages in equipment ; we ’ re seeing shortages in labour, and that has to do with the fact that the rebound of demand, the decompressed demand, if you will, is not exactly connected with the supply, and we have this supply - demand disconnection. the second, as i said, is energy, and on that front we have drivers of the energy prices that have to do with the recovery, that have to do with the demand, but also other factors having to do with inventory, with the wind, with maintenance in norway, with demand in china, with the supply by russia. all elements that actually are contributing to the high energy prices that we are facing at the moment. those are the three key buckets that are causing inflation as we discussed it today and yesterday afternoon. now, there is a third category, which is very much related to the base effects, and i would put first and foremost, obviously, the german vat, which is going to continue to impact our inflation numbers until the end of this year, but which will disappear as of 1 january. so that ’ s one category base effect that will fade as of the beginning of the year. we also believe that the other two buckets that i have just discussed with you, that is recovery - related and pandemic consequences on the one hand, energy

bottlenecks and rising energy prices are the main risks to the pace of recovery and the outlook for inflation. if supply shortages and higher energy prices last longer, these could slow down the recovery. at the same time, if persistent bottlenecks feed through into higher than anticipated wage rises or the economy returns more quickly to full capacity, price pressures could become stronger. however, economic activity could outperform our expectations if consumers become more confident and save less than currently expected. financial and monetary conditions growth and medium - term inflation dynamics still depend on favourable financing conditions for all sectors of the economy. market interest rates have increased. nevertheless, financing conditions for the economy remain favourable, not least because bank lending rates for firms and households remain at historically low levels. while there was a pick - up in september, lending to firms remains moderate. this continues to reflect the fact that firms generally need less external funding, since these have high cash holdings and are increasingly retaining their earnings. lending to households remains strong, driven by demand for mortgages. our most recent bank lending survey shows that credit conditions for firms stabilised and were supported – for the first time since 2018 – by a reduction in banks ’ risk perceptions. by contrast, banks are taking a slightly more cautious approach to housing loans and have tightened their lending standards for these loans accordingly. bank balance sheets continue to be supported by favourable funding conditions and remain solid. conclusion summing up, the euro area economy continues to recover strongly, although at a more moderate pace. rising energy prices, the recovery in demand and supply bottlenecks are 2 / 4 bis central bankers'speeches currently pushing up inflation. while inflation will take longer to decline than previously expected, we expect these factors to ease in the course of next year. we continue to foresee inflation in the medium term remaining below our two per cent target. our policy measures, including our revised forward guidance on the key ecb interest rates, are crucial to helping the economy shift to a sustained recovery and, ultimately, to bringing inflation over the medium term to our target. we are now ready to take your questions. * * * president lagarde, thank you very much for taking my questions. i was wondering, because the markets were – well, everybody was anticipating that this meeting was all about inflation, so what have you been discussing, and what was on top of your agenda? was there at least a slightly different assessment to the nature of inflation, given that inflation is at a 30 -