olli rehn : whither r *? the outlook for the natural rate of interest under short - run inflationary pressures and structural shifts policy keynote speech by mr olli rehn, governor of the bank of finland, at the bank of finland and cepr joint conference'monetary policy in times of large shocks ', helsinki, 16 june 2023. * * * ladies and gentlemen, dear friends, it is my great pleasure to welcome you to helsinki and to this timely conference on " monetary policy in times of large shocks ", jointly organized by the bank of finland and the centre for economic policy research. last year at the time of this conference, we were in the middle of the energy crisis caused by russia's unjustified war against ukraine. euro area inflation had just risen above 8 % and the growth outlook had turned highly uncertain. much has happened since then, also in monetary policy. the ecb has acted consistently to bring inflation back to its target. the key interest rates have been raised 8 times by a total of 4 percentage points, latest yesterday by 25 basis points. the ecb's key policy rate is now at 3. 5 percent. euro area inflation has proved more persistent than expected despite falling energy prices and easing supply bottlenecks. the persistence of inflation is due to gradually increasing labor costs, which are becoming a dominant driver of inflation. however, with energy inflation set to become increasingly negative through 2023 and food inflation somewhat moderating, headline inflation is expected to continue its decline towards 2. 2 % in 2025, as forecasted by eurosystem staff. euro area economic activity broadly stagnated at the turn of the year but has remained quite resilient. consumers are still benefitting from savings accumulated during the pandemic. uncertainty over energy prices has declined and fiscal easing measures have partly compensated the loss of real income due to high inflation. at the same time, supply bottlenecks have almost vanished. the governing council's future decisions will continue to follow a data - dependent approach. they will ensure that the key ecb interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2 % medium - term target and will be kept at those levels for as long as necessary. * * * dear friends, this outlook, however, calls for a longer - term perspective. once inflation has been aligned with the 2 % target, will interest rates remain at higher levels – once coined 1 /

age via cbdcs. the normal functioning of societies can be threatened not only through damage and disruption to critical infrastructure, but also by influencing people's minds and eroding trust. since the financial system is based on trust, these threats must be taken very seriously. with cyber threats becoming increasingly complex, we must continuously adapt and strengthen our cyber resilience. preparedness must be part of the costbenefit analysis and the overall planning of systems – that is, resilience by design. in severe disruptions, years of efficiency gains may be wiped out if recovery is delayed. regulation plays an important role in safeguarding against risks in the cyber universe. regulatory action is needed to address the immediate risks in the crypto - assets market and to support public policy goals. the eu is taking important steps forward with the forthcoming regulation of markets in crypto - assets ( mica ). it is the first attempt at creating comprehensive regulations for digital assets and is expected to come into force in 2024. mica will set a new standard, providing legal certainty for crypto - asset issuers, guaranteeing equal rights for service providers, and ensuring high standards for investors. dear colleagues and friends, safety and stability are the key characteristics of a sound monetary system that serves society. central bank money provides the reference value for all other forms of money in the economy. it plays a crucial role in sustaining confidence in the currency, in the smooth functioning of the payment system, and in safeguarding the transmission of monetary policy. central banks must prepare for a digital future in which demand for cash as a medium of exchange may decrease, requiring the convertibility of private money into cash to be complemented by convertibility into central bank digital money. and we should recall that solid and safe access to central bank money is the foundation for price and financial stability. convertibility into legal tender would also be the key for guaranteeing the value of digital euros provided by commercial banks. the bottom line is that the central bank should always provide the monetary anchor for the economy – and this would be the primary reason if the ecb were to decide to issue a digital euro. thank you very much for your kind attention. references : 4 / 5 bis - central bankers'speeches ulrich bindseil and george pantelopoulos, towards the holy grail of cross - border payments. ecb working paper 2693. lael brainard, crypto - assets and decentralized finance through a financial stability lens