##s to bank lending and deposit rates appears rather slow, government bond yieldsin malta have already begun to increase. such increases and tighter financing conditions abroad will eventually be reflected in a higher cost of funding for domestic banks, and eventually, households and corporates. it is essential to be reminded that on monetary, financial and economic terms malta is very much integrated with the rest of europe and that the decisions taken in frankfurt ripple across the whole euro area, malta included. 2 / 5 bis - central bankers'speeches the transmission of tighter monetary conditions to the interest rates that banks offer to their customers is necessary for inflation to return to the policy target of 2 % in a timely manner. but it is not sufficient. other policy actors also need to do their part. in particular, fiscal support has to be temporary and targeted, so that it avoids supporting demand for longer than is necessary. it should also be complemented with structural reforms that improve the security of supplies and reduce vulnerability to adverse global conditions and addresses market imperfections that propagate inflationary pressures. let me now turn to financial stability and macroprudential policy. financial stability may well be at its most vulnerable at the cusp of the ongoing shift in monetary policy, coupled with uncertainty on the euro area economic growth path spurred by the energy crisis. in such a regime shift, macroprudential policy has definitely a role to play. financial cycles are notoriously elusive to economists, as we lack a stable standard by which to gauge them. so rather than worrying too much about where we are exactly in the cycle, we should focus more on making sure that the system is adequately equipped to withstand possible shocks. covid - 19 has taught us a few lessons here. as macroprudential authorities, we need to ensure that our banking systems are resilient in the face of risk materialisation, which remains elevated in the euro area. this week, fellow eurozone countries reported that they not only stepped up their macroprudential measures, but are also using combinations of tools from the framework to buttress further the resilience of their financialsystems. management buffers mitigate the risk of procyclical impact on lending, preserving resilience. these are not popular measures in any country. but macroprudential authorities must remain true to their primary objective - to ensure financial stability, just as monetary authorities need to remain loyal to price stability. carving out resilience from within is always less painful than having to build

european central bank has hiked its policy rate from minus 0. 5 per cent to 4 per cent since last summer. experience shows that it takes some time before higher interest rates are fully reflected in activity in society. and then some more time before the dampened demand affects inflation. therefore, the interest rate increases haven't yet been fully passed through to activity in denmark. but the banks and those who borrow money are affected by the higher interest rates. the interest rate policy pursued by the ecb – and which we implement in denmark under our fixed exchange rate policy – has suited the danish economy well. developments in recent years have illustrated how the fixed exchange rate policy contributes to stability in denmark : even when the economic waters around us are slightly rougher to navigate in. although the interest rate increases have been significant, most of us in this room remember when interest rates were even higher. this gives rise to the question : when are interest rates high? and when are they high enough? this is a very good question with which scholars in many countries are grappling at the moment. i don't have the answer. but our opinion is that higher interest rates will – sooner or later – get in - flation under control. at the same time, it's important that fiscal policy doesn't counteract the effect of higher interest rates. 2 / 6 bis - central bankers'speeches monetary policy works through, among other measures, the interest rates that customers encounter in the banks. and our analyses show that interest rate changes in the banks have occurred faster in denmark than in the euro area. the difference between the lending rate and the money market interest rate – that is the lending margin – has decreased during the past years. this reflects competition between the institutions to lend money. at the same time, we're seeing remarkably low impairment charges and losses. conversely, banks have had less need to attract deposits because depos - its have been growing over several years. the large customer funding surplus reduces the banks'incentive to raise their deposit rates. we can see that households – including those with large deposits – have so far only sought alternatives such as time deposits and bonds to a lim - ited extent. i believe it's important to remember that deposit rates are set in the mar - ket and that transparency and competition between the financial institu - tions are key elements in keeping prices in check. and that leads me to your advisory task. you are well experienced in