global economic activity is, in fact, slowing down and growth estimates for next year have been progressively revised downwards by leading international institutions. the deterioration in the outlook continues to be affected by higher inflation, marked uncertainty over the ukraine conflict, worsening financial conditions and the weakening economy in china. 1 / 8 bis - central bankers'speeches 6. nevertheless, despite the challenging situation, based on the projections in the latest issue of the bank of italy's economic bulletin – which will likely be revised slightly upwards in light of the new data – the baseline scenario assumes a slight growth on average for the year 2023 ; only in a stressed scenario ( with a total freeze on russian gas imports ) would there be a decrease on average over the year. however, economic uncertainty remains exceptionally high because of the extreme and unpredictable nature of some risks, especially those linked to the war. 7. the surge in inflation, which has reached levels unmatched for decades in the advanced economies, is of grave concern. according to the latest available data, the increase in consumer prices exceeded 8 per cent in the united states in september and, based on a preliminary estimate, neared 11 per cent in the euro area in october. in italy, inflation is running at an even faster pace than the average : according to the harmonised definition, it was 12. 8 per cent in october. 8. in response to the strong acceleration in prices, central banks have started a normalisation of monetary conditions in order to reabsorb the high degree of accommodation decided upon to offset the effects of the pandemic. this is necessary to keep inflation expectations anchored and bring inflation back in line with the definition of medium - term price stability adopted in the leading advanced economies. 9. in the euro area, following the end of its net asset purchases, the ecb governing council started increasing its key interest rates, by 2 percentage points overall since july, thus bringing the deposit facility rate back from negative values to 1. 5 per cent. the council has announced that it expects to raise them again at its next meetings, at a pace and to a level that will be determined on the basis of new data and on revisions to the inflation and growth outlooks. markets and non - bank intermediaries 10. the normalisation of monetary policy, which is necessary to give a firm and unequivocal signal on inflation, is coinciding – in this difficult global situation – with heightened market volatility and occasional episodes of illiq

. it is therefore all the more necessary for them to be closely monitored by both banks and the main, often concentrated, technology service providers they use. * * * 39. let me conclude by going back to the most pressing current issues. 40. the sharp rise in inflation requires the full attention of economic policymakers. if it is not stopped in a timely manner, it risks devaluing incomes and depleting savings. to counter this, all policies need to work together, with monetary policy at the forefront. should price expectations lose the anchor of stability, even the easing of exogenous cost pressures, though desirable, would not be sufficient to halt the process. 41. for the central bank, price stability is the primary, constitutionally imperative objective. the ecb has taken the path to calibrated but firm monetary normalisation and has announced that this path will continue. this will not be easy due to the new challenges, the inherent complexities of monetary policy interventions, affected by'long and variable'delays, the uncertainties of the global macroeconomic outlook, and the potential fragilities underlying financial markets. 42. in europe, rising interest rates and the gradual phasing out of quantitative easing require careful and forward - looking policies on the part of everyone to avoid the emergence of tensions and possible fragmentation. the governing council stands ready to use all the flexibility necessary in reinvesting securities under the pandemic emergency purchase programme ( pepp ), and has set up a dedicated monetary policy transmission protection instrument ( tpi ) that will be activated, if necessary, in the event of fragmentation not due to imbalances in the public finances or in the macroeconomic conditions. 43. policies will have to be consistent at national level. as far as italy is concerned, i can only repeat the words spoken a few days ago by governor visco :'this makes it all the more important to set out a realistic path to continue the process of gradually reducing the high public debt - to - gdp ratios initiated in the past two years.'44. banks must not fail to support the economy with prudent lending. the conditions are already in place : sound balance sheets, adequate capital, and non - performing loans amounting to a fraction of what they were ten years ago. if we had been able to foresee at that time today's situation, which has resisted and is indeed stronger despite two 7 / 8 bis - central bankers'speeches crises of historic proportions