pressures, including from rising wages and still robust profit margins, are becoming an increasingly important driver of inflation. while some measures are moving lower, underlying inflation remains high overall, including owing to the persistent impact of past energy price increases on economywide prices. although most measures of longer - term inflation expectations currently stand at around 2 per cent, some indicators remain elevated and need to be monitored closely. risk assessment 2 / 4 bis - central bankers'speeches the outlook for economic growth and inflation remains highly uncertain. downside risks to growth include russia's unjustified war against ukraine and an increase in broader geopolitical tensions, which could fragment global trade and thus weigh on the euro area economy. growth could also be slower if the effects of monetary policy are more forceful than expected, or if the world economy weakens and thereby dampens demand for euro area exports. conversely, growth could be higher than projected if the strong labour market, rising real incomes and receding uncertainty mean that people and businesses become more confident and spend more. upside risks to inflation include potential renewed upward pressures on the costs of energy and food, also related to russia's unilateral withdrawal from the black sea grain initiative. adverse weather conditions, in light of the unfolding climate crisis, may push up food prices by more than projected. a lasting rise in inflation expectations above our target, or higher than anticipated increases in wages or profit margins, could also drive inflation higher, including over the medium term. by contrast, weaker demand – for example owing to a stronger transmission of monetary policy – would lead to lower price pressures, especially over the medium term. moreover, inflation would come down faster if declining energy prices and lower food price increases were to pass through to the prices of other goods and services more quickly than currently anticipated. financial and monetary conditions our monetary policy tightening continues to be transmitted strongly to broader financing conditions. risk - free interest rates over short to medium - term maturities have increased since our last meeting and funding has become more expensive for banks, in part owing to the ongoing phasing - out of the ecb's targeted longer - term refinancing operations ( tltros ). the large tltro repayment in june went smoothly, as banks were well prepared. average lending rates for business loans and mortgages rose again in may, to 4. 6 per cent and 3. 6 per cent respectively. higher borrowing rates and the associated cuts in spending plans led to a further sharp

drop in credit demand in the second quarter, as reported in our latest bank lending survey. moreover, credit standards for loans to firms and households tightened further, as banks are becoming more concerned about the risks faced by their customers and are less willing to bear these risks. tighter financing conditions are also making housing less affordable and less attractive as an investment, and demand for mortgages has dropped for the fifth quarter in a row. against this background, the annual growth rate of lending continued to decrease in june, falling to 3. 0 per cent for firms and 1. 7 per cent for households, with annualised growth rates of 0. 0 per cent and - 0. 2 per cent in the second quarter respectively. amid weak lending and the reduction in the eurosystem balance sheet, the annual growth rate of broad money fell to 0. 6 per cent in june, with an annualised growth rate of - 1. 1 per cent in the second quarter. conclusion inflation continues to decline but is still expected to remain too high for too long. the governing council therefore today decided to raise the three key ecb interest rates by 25 basis points. 3 / 4 bis - central bankers'speeches our future decisions will ensure that the key ecb interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our two per cent medium - term target. we will continue to follow a data - dependent approach to determining the appropriate level and duration of restriction. in particular, our interest rate decisions will continue to be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. in any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation returns to our medium - term target and to preserve the smooth functioning of monetary policy transmission. we are now ready to take your questions. 4 / 4 bis - central bankers'speeches