inflation expectations mostly stand around 2 per cent. nonetheless, some indicators remain elevated and need to be monitored closely. risk assessment the risks to economic growth remain tilted to the downside. growth could be lower if the effects of monetary policy turn out stronger than expected. a weaker world economy would also weigh on growth. russia's unjustified war against ukraine and the 2 / 4 bis - central bankers'speeches tragic conflict triggered by the terrorist attacks in israel are key sources of geopolitical risk. this may result in firms and households becoming less confident and more uncertain about the future, and dampen growth further. conversely, growth could be higher than expected if the still resilient labour market and rising real incomes mean that people and businesses become more confident and spend more, or the world economy grows more strongly than expected. upside risks to inflation could come from higher energy and food costs. the heightened geopolitical tensions could drive up energy prices in the near term, while making the medium - term outlook more uncertain. extreme weather, and the unfolding climate crisis more broadly, could push food prices up by more than expected. 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 or a worsening of the economic environment in the rest of the world amid greater geopolitical risks – would ease price pressures, especially over the medium term. financial and monetary conditions longer - term interest rates have risen markedly since our last meeting, reflecting strong increases in other major economies. our monetary policy continues to transmit strongly into broader financing conditions. funding has become more expensive for banks, and interest rates for business loans and mortgages rose again in august, to 5. 0 per cent and 3. 9 per cent respectively. higher borrowing rates, with the associated cuts in investment plans and house purchases, led to a further sharp drop in credit demand in the third quarter, as reported in our latest bank lending survey. moreover, credit standards for loans to firms and households tightened further. banks are becoming more concerned about the risks faced by their customers and are less willing to take on risks themselves. against this background, credit dynamics have weakened further. the annual growth rate of loans to firms has dropped sharply, from 2. 2 per cent in july to 0. 7 per cent in august and 0. 2 per cent in september.

loans to households remained subdued, with the growth rate slowing to 1. 0 per cent in august and 0. 8 per cent in september. amid weak lending and the reduction in the eurosystem balance sheet, the annual growth rate of m3 fell to - 1. 3 per cent in august – the lowest level recorded since the start of the euro – and still stood at - 1. 2 per cent in september. conclusion the governing council today decided to keep the three key ecb interest rates unchanged. the incoming information has broadly confirmed our previous assessment of the medium - term inflation outlook. inflation is still expected to stay too high for too long, and domestic price pressures remain strong. at the same time, inflation dropped markedly in september, including due to strong base effects, and most measures of underlying inflation have continued to ease. our past interest rate increases continue to be transmitted forcefully into financing conditions. this is increasingly dampening demand and thereby helps push down inflation. 3 / 4 bis - central bankers'speeches we are determined to ensure that inflation returns to our two per cent medium - term target in a timely manner. based on our current assessment, we consider that rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target. our future decisions will ensure that the key ecb interest rates will be set at sufficiently restrictive levels for as long as necessary to ensure such a timely return. we will continue to follow a data - dependent approach to determining the appropriate level and duration of restriction. 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