in the current climate it is natural to ask whether the central bank has adequate instruments to keep inflation in check. the answer is yes. but it cannot be denied that a strong counter - effect by other forces, actions or expectations will obviously make the central bank ’ s task more difficult. there are many reasons that inflation is above target and will remain there for some time, which i shall not dwell upon here. they have already been discussed in depth in the central bank ’ s publications, for example. with a sufficiently tight monetary stance, the central bank is convinced that the inflation target will be attained, and this is its goal. it will require a sufficiently tight stance for a sufficiently long time. the bank ’ s most recent interest rate decision must be seen in this light. the rationale behind it was explained in a press release issued by the central bank this morning [ may 18, 2006 ]. as i mentioned, the rise in the housing component explains the bulk of recent increases in the cpi. so it is not surprising that people have wondered whether the housing component should be included in the index on which the inflation target is based. the central bank has held this view, partly because changes in housing prices tend to be a leading indicator of private consumption and inflation, and also because over the years the cpi excluding the housing component has been more volatile than with it. including the housing component in the cpi in effect makes the index less volatile. of course it is natural to ask whether the right reference is being used for the inflation target and the central bank is obviously open for such discussion. however, it is absurd to change the cpi or strip it of certain components that become temporarily troublesome. the monetary policy framework and its implementation must not be changed except when the economy is in balance, and then only on the basis of long - term perspective, not vague short - term interests. financial stability over the past weeks and months, the icelandic financial sector has been in the spotlight domestically and, not least, internationally. not all of this publicity has necessarily been worth striving for. at the beginning of may the central bank published its annual financial stability report. it includes an analysis of macroeconomic stability and the position and strength of financial companies. the central bank ’ s overall finding now was that in spite of rapid expansion and the macroeconomic imbalances that need to be tackled in the coming years, the icelandic financial system is broadly sound. the position of the large commercial banks is crucial for the financial

christine lagarde : ecb press conference - introductory statement introductory statement by ms christine lagarde, president of the european central bank, and mr luis de guindos, vice - president of the european central bank, frankfurt am main, 10 march 2022. * * * good afternoon, the vice - president and i welcome you to our press conference. the russian invasion of ukraine is a watershed for europe. the governing council expresses its full support to the people of ukraine. we will ensure smooth liquidity conditions and implement the sanctions decided by the european union and european governments. we will take whatever action is needed to fulfil the ecb ’ s mandate to pursue price stability and to safeguard financial stability. the russia - ukraine war will have a material impact on economic activity and inflation through higher energy and commodity prices, the disruption of international commerce and weaker confidence. the extent of these effects will depend on how the conflict evolves, on the impact of current sanctions and on possible further measures. in recognition of the highly uncertain environment, the governing council considered a range of scenarios in today ’ s meeting. the impact of the russia - ukraine war has to be assessed in the context of solid underlying conditions for the euro area economy, helped by ample policy support. the recovery of the economy is boosted by the fading impact of the omicron coronavirus variant. supply bottlenecks have been showing some signs of easing and the labour market has been improving further. in the baseline of the new staff projections, which incorporate a first assessment of the implications of the war, gdp growth has been revised downwards for the near term, owing to the war in ukraine. the projections foresee the economy growing at 3. 7 per cent in 2022, 2. 8 per cent in 2023 and 1. 6 per cent in 2024. inflation has continued to surprise on the upside because of unexpectedly high energy costs. price rises have also become more broadly based. the baseline for inflation in the new staff projections has been revised upwards significantly, with annual inflation at 5. 1 per cent in 2022, 2. 1 per cent in 2023 and 1. 9 per cent in 2024. inflation excluding food and energy is projected to average 2. 6 per cent in 2022, 1. 8 per cent in 2023 and 1. 9 per cent in 2024, also higher than in the december projections. longer - term inflation expectations across a range of measures have re - anchored at our inflation target