long as necessary. we will continue to follow a datadependent approach to determining the appropriate level and duration of restriction. in particular, our policy rate decisions will continue to be based on our assessment of the inflation outlook in the light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission. as requested by you, let me now discuss the financial stability outlook. financial stability is a pre - condition for price stability and vice versa. 2 / 4 bis - central bankers'speeches financial stability in the euro area has proved robust so far, but we continue to assess possible risks, taking into account a wide range of indicators. 2 euro area banks'exposure to the recent banking sector stress which arose in other regions has been limited. but challenges to funding and asset quality may weigh on future profitability. more broadly, as financing conditions tighten, we will gain more insight into the resilience of euro area firms, households and banks. the medium - term orientation of our monetary policy strategy allows us to consider financial stability in monetary policy decisions if this supports the pursuit of price stability. conversely, price stability remains as crucial as ever for durably preserving financial stability. we do not see a trade - off between financial stability and price stability in the euro area. over time, the pursuit of price stability through monetary policy, and of financial stability primarily through macroprudential policy, are complementary. in addition, the ecb has the tools to provide liquidity to the euro area financial system if needed to preserve financial stability and the smooth transmission of monetary policy. we remain committed to price stability. and to support financial stability, it is essential that you, as co - legislators, make tangible progress towards completing the banking union and that you strengthen regulatory policies to further enhance the resilience of the euro area financial sector. conclusion allow me to conclude. in 1998, former ecb president willem duisenberg stressed that the european system of central banks ( escb ) should be open, transparent and accountable, noting that " the most important challenge for the escb is to win the confidence of the citizens of europe ". 3 25 years on, this is still an important challenge, and we are working hard to further foster trust in our institution. but the ecb cannot do this alone. today's dialogue with you, who represent the people of europe, is essential to that endeavour. this is why i am delighted that i have just signed, together

with the president of the european parliament, an exchange of letters between our two institutions. building on our close and fruitful dialogue over the past 25 years, this exchange of letters will allow us to better structure our interactions and facilitate effective cooperation. 4 together we must do all we can to keep listening and responding to concerns of european citizens. thank you. i now stand ready to take your questions. 3 / 4 bis - central bankers'speeches 1 recent ecb staff analysis estimates that the tightening of monetary policy since december 2021 will have a downward impact on inflation of two percentage points on average over the period 2023 - 25, compared with a situation in which policy remained unchanged. the bulk of this impact can be attributed to rate policy, with a less material though non - negligible contribution stemming from the reduction in the asset purchase programme portfolio. see european central bank ( 2023 ), " a model - based assessment of the macroeconomic impact of the ecb's monetary policy tightening since december 2021 ", economic bulletin, issue 3. 2 see the latest ecb financial stability review. 3 duisenberg, w. ( 1998 ), " ceremony on the occasion of the establishment of the european system of central banks ", speech, 30 june. 4 see " arrangements in the form of an exchange of letters between the european central bank and the european parliament on structuring the practices for interaction in the area of central banking ", 5 june 2023. 4 / 4 bis - central bankers'speeches