shocks was improved, sometimes by a deeper integration and sometimes by an ability to adapt the governance to new circumstances. however, the current environment and the macroeconomic outlook clearly bring new geopolitical, social, economic and financial challenges. from the eurosystem and its monetary policy perspective, the main risk to fight in order to ensure price stability in the medium run is no longer that of " too low inflation for too long ", but that of " too high for 1 / 4 bis - central bankers'speeches too long " inflation. the euro area has moved into a situation characterised by a surge in inflation, the likes of which has not be seen since the early 1980s. this new macroeconomic context implies a change of course of monetary policy. 1. economic position of the euro area in the cycle as regards the macroeconomic situation of the euro area, let me start with stating the obvious in saying that the economic outlook has deteriorated steadily over the year. upward revisions to inflation forecasts have been accompanied by downward revisions to growth forecasts. the war in ukraine and the lockdown in china have fuelled a " slowflationary " shock which is now threatening to morph into a " stagflationary " one. the most recent data point to a substantial slowdown in euro area economic growth. there are several factors explaining this. the negative shock on terms of trade resulting from very high energy prices is reducing the real income of both households and firms. although supply bottlenecks are easing, they are still constraining economic activity. in addition, the adverse geopolitical situation, especially russia's unjustified war in ukraine, is weighing on the confidence of businesses and consumers. as a consequence, the projections for economic growth have been revised downward markedly for the remainder of the current year and throughout 2023. in its september projections, the ecb now expects the economy to grow by 3. 1 % in 2022, 0. 9 % in 2023 and 1. 9 % in 2024, in its baseline scenario. the european and french economies are therefore likely to suffer a significant slowdown next year, and the possibility of a limited recession cannot be excluded. but growth is expected to resume in 2024. i turn now to our assessment regarding the recent developments of inflation in the euro area. the rise in consumer prices has amplified in recent months in the euro area, reaching 9. 1 % in august according to the harmonised index of consumer prices. in

france, inflation levelled at 6. 6 %, the lowest level in the euro area, thanks in particular to the tariff shield, but still stands at three times the inflation target of the eurosystem. the flash estimates for september didn't bring a fundamental change to this landscape as inflation reached 10 % in the euro area, and the mild levelling off in france was confirmed with a figure of 6. 2 %. in our view, the current surge in inflation has its roots not in excess liquidity, but in supply bottlenecks stemming from the faster - than - expected rebound in activity in the aftermath of the pandemic, and the sharp rise in energy and food prices, which was greatly exacerbated by the war in ukraine. the inflation we are currently seeing is largely imported, and much of it - about twothirds for the euro area - is driven by energy and food prices. the recent surge in international gas prices has led the ecb to predict a peak in inflation by the end of 2022. 2 / 4 bis - central bankers'speeches however, inflation in the euro area is also becoming more'domestic'and'broad - based ', with the other components of inflation all rising : core inflation ( excluding energy and food ) is now 4. 8 % in the euro area ( and 3. 7 % in france ) according to the september flash estimates, and the rise in prices is spreading to goods and services - which account for the other half of total inflation. it is this more " domestic " inflation for which the central banks are responsible, and which they must not let get out of hand and persist. this is the critical objective and commitment underlying the action taken by the governing council of ecb. accordingly, their will and capacity to bring inflation down to 2 % in the next two to three years in the euro area should not be subject to any doubt what so ever. 2. implications for monetary policy so, what are the implications of the current situation for monetary policy in the euro area? the fundamental change of the nature of risk to address, clearly implies a normalisation of monetary policy, which means dismantling measures adopted to fight a risk of deflation and a rapid adoption of at least a neutral stance. in terms of ecb key policy interest rates, this translated in a quick return to positive territory, moving towards the so called " neutral rate ". at what speed is this move to the neutral rate, which we