higher as well. member states should also take note of the european commission's fiscal policy guidance for 2024. turning to growth, we moved away from a baseline scenario with a technical recession at the turn of the year, as economic activity proved to be more resilient than expected at the end of 2022. in our march projections, the outlook for growth was revised up, to an average of 1 % in 2023. however, these projections were finalised before the events of the past few weeks, which are now adding uncertainty to our assessments. nevertheless, reduced concerns about energy shortages and price increases, coupled with the continued resilience of the labour market, are expected to support activity over the coming quarters. in short, the growth outlook remains weak, but it has improved somewhat. at the governing council meeting in march, we decided to increase the three key ecb interest rates by 50 basis points, in line with our determination to ensure the timely return of inflation to our 2 % medium - term target. as part of the monetary policy normalisation process, from the beginning of march, our asset purchase programme portfolio has been declining at a pace of €15 billion per month, on average, and it will continue to decline at this pace until the end of june 2023, while its subsequent pace 2 / 3 bis - central bankers'speeches will be determined overtime. uncertainty has increased, so we are monitoring current market tensions closely and stand ready to respond as necessary to preserve price stability and financial stability in the euro area. but let me go back to financial stability. just a few weeks ago, before tensions in financial markets emerged on both sides of the atlantic, the overall improvement in the outlook for growth and inflation was supporting overly benign macro - financial expectations on the part of banks and financial market participants. despite rising funding costs, bank profitability has improved, driven by significantly higher net interest income while impairments and provisions have been muted so far. overall, from a system - wide perspective, euro area banks are moderately exposed to interest rate risk. most are actually positioned to initially benefit from increasing interest rates, which boost net interest margins. on average, loan book repricing tends to more than offset higher funding costs and mark - to - market losses on fixed income securities. it is inevitable however that, with the tightening of financing conditions and in line with our policy objective, lending dynamics are weakening and may weigh on bank profitability going forward. of course, certain bank business models

14 trillion of sovereign paper had negative yields. for the past decade, the yield structure in the us has been lower than at any time previously. let me put in context the current excitement about the 10 - year yield in the us reaching 3 per cent. in the three decades prior to 2007, the low point for the yield was 3. 11 per cent. all this goes to say that we have been living in a period of unusually low nominal bond yields. how long will this period last? one way to think about this question is to ask whether what we are seeing is the realisation of a tail event in the historical distribution of interest rates. 1 while this tail event has now lasted quite a long time, if you thought it was a tail event, then you would expect yields to revert back to their historical mean at some point. you also wouldn ’ t change your assessment of the distribution of future realisation of interest rates. on the other hand, it might be the case that the yield structure has shifted to a permanently lower level because of ( say ) secular stagnation resulting in structurally lower growth rates for the major economies for the foreseeable future. if this were the case, you would change your assessment of future interest rate outcomes. i don ’ t know the answer to this question, but it has material implications for asset pricing. 2 / 14 bis central bankers'speeches as i said earlier, the prices of many assets could be broadly validated if you believe the low rate structure is here to stay. 2 this is because the lower rate structure means that the rate with which you discount expected future returns on your asset is lower and hence the asset price is higher for any given flow of future earnings. the current constellation of asset prices seems to be based on the view that the global economy can grow strongly, with associated earnings growth, but that strong growth will not lead to any material increase in inflationary pressure. 3 you might want to question how long such a benign conjuncture could last. current asset pricing suggests that the ( average ) expectation of market participants is that it will last for quite a while yet. it is also worth pointing out that it is possible that a move higher in interest rates occurs alongside higher expected ( nominal ) dividends because of even higher real growth. if this were to occur it would not necessarily imply that asset prices have to adjust. it would depend upon the relative movements in earnings expectations and interest rates ; that is, the numerator