use of funds raised from green financial bonds in the interbank market is now required to be disclosed on a quarterly basis. financial institutions are also required to report the use and allocation of green loans. going forward, the pbc plans to develop a mandatory disclosure system that would require all financial institutions and firms to follow uniform disclosure standards. third, we will incorporate climate change into the policy framework. the pbc is looking at the possibility of including climate change factors in the stress test of financial institutions. we are also exploring the role of monetary policy in encouraging financial institutions to support carbon emission reduction. in foreign exchange reserve investment, we will further increase the share of green bonds, limit investment in carbon - intensive assets, and incorporate climate risk factors into our risk management framework. fourth, we will encourage financial institutions to proactively deal with the climate change risk. a lot of financial institutions are already on the move. in china, the icbc has included the environmental risk compliance in its investment and financing management, while the bank of china is studying environmental risk stress test. the first batch of carbon - neutral bonds has recently been issued in china ’ s interbank market. the funds raised will be used specifically to finance clean energy and carbon - reduction projects. we are asking some pilot financial institutions to measure the carbon emission and climate risks of their projects. we are making quarterly green credit assessment of our banks, and are planning to extend such assessment to cover more financial institutions beyond the banks. fifth, we will deepen international cooperation. the pbc initiated and co - chaired the sustainable finance study group during china ’ s g20 presidency in 2016. the study group contributed to building international consensus on green finance. resumed under the italian g20 presidency this year, the study group is now co - chaired by the pbc and the us treasury. we will enhance coordination with all g20 members when discussing the roadmap for promoting sustainable finance, information disclosure, and the taxonomy of green finance. meanwhile, the pbc will continue to deepen cooperation under the network for greening the financial system ( ngfs ), the international platform on sustainable finance ( ipsf ) and other multilateral frameworks. we will continue to assist the developing countries in capacity building to support their green transition and response to climate change. in a nutshell, the financial system can play a key role in supporting green transition and managing climate - related risks. going forward, the pbc will continue to support green and high - quality

on medium - term projections, which are surrounded by too much uncertainty. that is why our reaction function has a second element – the dynamics of underlying inflation. underlying inflation underlying inflation refers to the slow - moving part of inflation which, when temporary shocks have faded, will persist into the medium term. therefore, by looking at underlying inflation, we can be more confident that inflation is on the right path. and it has an important benefit – measures of underlying inflation can be observed in real time. however, there is no clear evidence that underlying inflation has peaked. to date, all measures monitored by the ecb are still strong. and whether they remain so will depend mainly on the balance between two forces : energy prices and wages. on the one hand, as energy is an important input into every economic activity, the sharp rise in energy prices last year has fed through to all prices – including those that make up our various measures of underlying inflation. but energy prices have dropped considerably since then, which should have the opposite effect. hicp energy inflation in germany fell from 44. 2 % in september 2022 to 9. 4 % in april 2023. this decline in energy costs for both consumers and producers should, in turn, limit firms ’ ability to further raise profit margins, which has been a key factor driving recent price pressures in the euro area. consumers are less likely to accept disproportionate price rises when they know that firms are saving on their energy bills. on the other hand, mounting wage pressures are becoming a more important driver of inflation. so far, workers have faced a significant loss from the erosion in overall labour income caused by the energy crisis. in the euro area, real wages at the end of last year were still around 4 percentage points below prepandemic levels. but labour markets across the euro area are tight and workers have considerable bargaining power, which they are starting to use to recoup these losses. this is especially visible here in germany, where labour shortages reached historic highs in the second half of last year, [ 7 ] leading to strong wage agreements in many sectors. wage growth in germany increased from 3. 9 % in the fourth quarter of last year to 5. 1 % in the first quarter of this year. to be clear : a period of catch - up wage growth need not cause unduly persistent inflation over time – if the costs of the energy shock are ultimately shared in a balanced way between firms and workers. but if we start