 Well, that was a very successful ring of the bell. Good evening, everyone. And thank you, and particularly thank you, President Lagarde, for your kind introduction. And thank you to the ECB for inviting me to participate in this forum at what is a very critical time for central banking. I don't think I have to tell you this, but the battle against inflation is very much ongoing. Both in the euro area and in many other places in the world. Headline inflation has declined. I think we should recognize that. It has declined significantly. But core inflation, the stickier components of inflation, remain persistently high. Therefore, central banks have to continue to fight high inflation now, at the same time as they determine how and if monetary policy strategies need to change, given the challenges of the future. Now, this is no easy task. And this evening, what I'm going to do is I will focus on how to contend with high inflation by confronting what I will call three uncomfortable truths for monetary policy. The first uncomfortable truth is that inflation is taking too long to get back to target. This means that central banks, including DCB, must remain committed to fighting inflation, even if that risks weaker growth. The second uncomfortable truth is that financial stresses could generate tensions between central banks' price and financial stability objectives. Therefore, achieving separation is certainly possible in principle, but cannot be taken for granted. The third uncomfortable truth is that, going forward, central banks are likely to experience more upside risks to inflation than they did before the pandemic. Monetary policy strategies and tools like forward guidance and quantitative easing will accordingly need to be refined. So I'm going to walk through the three uncomfortable truths, and let me start with the first one, which is that inflation is taking too long to get back to target. Inflation forecasters have been optimistic that inflation will revert quickly to target ever since it spiked two years ago. And as you can see from this slide, this includes the ECB. It also includes the IMF. Both of our forecasts are almost indistinguishable. What we see in these charts is that inflation sits well above previous forecasts. So this reminds me of Samuel Beckett's famous play, Waiting for Godot. In the play, both the cast and the audience await a mysterious character named Godot who never appears. Now, similarly, we are waiting for low inflation to reappear. Of course, we hope that real life is going to end very differently than the play did. But as of now, the audience is still waiting. Now, despite repeated forecast errors, markets, I should single out, are particularly optimistic that inflation in the euro area and most advanced economies will recede to near target levels relatively quickly. These disinflation hopes underpin expectations that policy rates will also then decline quickly, despite central bank guidance to the contrary. Surveys of market analysts paint a similar picture and suggest that inflation is likely to come down without much of a hit to growth. Now, it's important to bear in mind that there is not much historical precedent for such an outcome. Setting aside forecasts, the fact is that inflation is too high and remains broad-based in many countries, including the euro area. While headline inflation has eased significantly, inflation in services has stayed high, and the date by when it is expected to return to target could slip further. While ongoing research will shed light on why inflation has proved so sticky, several factors are probably at play and continue to pose upside risks. First, while ECB has raised interest rates by 400 basis point, which is the most it's done in its history, activity has only slowed modestly. The unemployment rate is at historical lows. Wage growth has been solid and is picking up, even though it's not enough to reverse the sharp declines in real wages that we've seen in these past two years. So if you take the combination of tight labor markets, a still solid stock of household savings, and remaining pent up demand, the combination of the three could be behind the resilience and activity that we're seeing in many countries. Second, despite the large increase in the nominal policy rate, financial conditions may not be tight enough. I have a question mark there, because I'm saying that it isn't, but it's a question mark. And if financial conditions are not tight enough, that impedes monetary policy transmission. As you can see in the chart, real rates using market-based measures of inflation expectations are still quite low, and near-term real rates using household measures are likely negative. Lastly, the pandemic has likely lowered potential output and productivity, which would also help some of the upward pressures on inflation. What is worrisome is that sustained high inflation could change inflation dynamics and make the task of bringing down inflation even more difficult. Given the massive decline in real wages since the pandemic, some wage catch-up is to be expected. But if inflation is to fall quickly, it must be that firms allow their profit margins, which have shut up in the past two years, to decline and absorb this expected rise in wages. Firms may, however, resist that, especially in an economy that remains resilient, and workers may demand a payback for their real wage losses. Such dynamics would slow inflation reduction and likely feed into expectations and increase susceptibility to further cost per shock. Some side effects of fighting inflation with monetary policy alone could be reduced if fiscal policy played a bigger role. Indeed, I think it's fair to say that economic conditions call for fiscal tightening, because that could help cool demand and reduce the need for monetary policy to raise interest rates further and have other possible side effects on the economy. Now, at a minimum, it is absolutely critical for euro area governments to resist any temptation to dilute the deficit reduction that they're currently projected with their current policies. Where support is needed, they must shift from providing broad-based to well-targeted support. And revenue windfalls from high inflation should be saved. Now, a respective of fiscal stance, ultimately, it is up to central banks to bring down inflation. With underlying inflation high and upside inflation risks substantial, risk management considerations in the euro area suggest that monetary policy should continue to tighten and then remain in restrictive territory until core inflation is firmly on a downward path. The ECB and other central banks that are in a similar situation should be prepared to react forcefully to further upside inflation pressures or to evidence that inflation is more persistent. Even if it means much more cooling of the labor market. The cost of fighting inflation we know will be significantly larger if a protracted period of high inflation boosts inflation expectations and changes inflation dynamics. There are, indeed, some downside risks to inflation that could arise. For instance, we've seen unwinding of supply-side pressures. We've also seen a significant decline in energy prices. The effect of all the monetary policy tightening that has happened is only still working through the system. Now, while central banks must be vigilant about not easing prematurely, they should be prepared to adjust course if a chorus of indicators, not one, but a combination of indicators, suggest that these downside inflation risks are materializing. If inflation persists and central banks need to tighten much more than markets expect, today's modestly tight financial conditions could give way to a rapid repricing of assets and a sharp rise in credit spreads. We've seen this during the past year. We saw that these past few months in the US. But we've also seen stresses, for instance, show up in Korea and in the UK. For the euro area, tighter monetary policy may also have diverse regional effects, which spreads rising much more in some high-debt economies. This then brings me to my second uncomfortable truth, which is that financial stresses could generate tensions between central banks, price, and financial stability objectives. And this is because while central banks can extend liquidity support to solvent banks, they are ill-equipped to deal with insolvent borrowers. Let me explain. If financial stresses remain modest, central banks shouldn't face too much of a challenge in achieving both their price and financial stability objectives. If households and firms face a rise in borrowing costs because of the financial stresses that emerge, central banks can lower policy rates while still attaining the same output and inflation reduction. Other relatively standard central bank tools like discount window lending and other forms of liquidity support can also help. Now, of course, there is a communication challenge because when you're lowering policy rates in the midst of high inflation, there can be a challenge. This is not what I would describe as a tension. The situation becomes much more difficult if financial stresses threaten to morph into a systemic crisis. Importantly, to forestall such a crisis, it can go beyond what central banks can do. While they can extend, as I said, broad-based liquidity support to solvent banks, they can't provide support to insolvent banks, firms, or households. These must be addressed by governments and may require sizable fiscal resources. And central banks may be considerably limited in what they can do for non-banks, given difficulties in assessing solvency, and also the political economy considerations of picking winners and losers. Forceful and timely interventions that are backed with requisite fiscal support could allow monetary policy to focus on price stability, as was the case in the most recent episodes of financial stress. This kind of separation is clearly the most desirable outcome. But when governments lack fiscal space or political will to respond to problems, central banks may need to adjust their monetary policy reaction function to account for financial stress. Now, while central banks must never lose sight of their commitment to price stability, they could tolerate a somewhat slower return to the inflation target to avert systemic stress. Even so, the bar for doing so should be very high, because such a shift in the reaction function could lead the central bank behind the curve in fighting inflation. As, for instance, happened when the Federal Reserve decided to ease policy in the mid-1960s on fears of a credit crunch, even as inflation pressures were sizable. So put simply, while separation is achievable in principle, it is challenging in practice and must not be taken for granted. The ECB has taken forceful steps to help achieve both its price and financial stability goals, among the many things that's done, the transmission protection instrument helps guard against the risk of a sharp divergence in borrowing costs across countries. So the question then is, what else can the ECB and the European Union take? Now, let me also first start by stating the many things that are already going quite well, which is that the EU, for example, applies Basel III capital and liquidity requirements to all banks and not just to the large ones. And if you look at the banking system as a whole and their capital and liquidity ratios, they look solid. In the near term, they could continue enhanced risk assessments and bank stress testing, as that will help EU banks remain resilient to rate hikes. And if it does happen, rapid deposit outflows. In addition, ensuring that you have prudent public debt parts to safeguard fiscal sustainability, including critically by finalizing the reform of the EU economic and fiscal governance framework, is needed. So is strengthening pan-European institutions, such as the European stability mechanism, that can provide rapid financial support to sovereigns and to the single resolution fund as needed. As part of its journey towards completing a banking union, the EU should make meaningful progress towards a European deposit insurance scheme to increase risk sharing across borders. Making the EU crisis management and back resolution framework more flexible, possibly by including a systemic risk exception, would also help raise resilience. Moreover, we need further progress on a capital markets union, as that will help deepen capital markets, enhance risk sharing, and also reduce fragmentation risks within the EU. On the macro-prudential side, it would be helpful to strengthen capital buffers further. Banks have experienced record high profits, which some of which we think are just temporary. And we expect that some of those profits should be saved in the form of higher capital buffers. The macro-prudential toolkit should also be expanded to non-banks. This brings me to a third uncomfortable shrewd. Central banks are likely to experience more upside inflation risks than they faced prior to the pandemic. And accordingly, monetary policy strategies and tools that we are familiar with, like forward guidance and quantitative easing, the use of that must be refined. The monetary policy strategies that we have come to live with that were implemented in the post-GFC period by DCB and other major central banks focused heavily on supporting economic activity and boosting too low inflation. Because at that point, the main constraint was the so-called effective lower bound. There was little sense that inflation could rise persistently above target, given the perceived flatness of the Phillips Co. Or that central banks would face significant trade-offs in addressing supply shocks. So from a risk management consideration, what needed to be done was to tilt heavily towards addressing the downside risks to activity and to inflation. Looking forward, central banks are likely to experience more upside inflation risks than before the pandemic for two sets of reasons, and these are different reasons. Some of the upside risks reflect structural changes, like what can come about from geo-economic fragmentation. But another set of reasons that even if you don't have these additional risks, what we have learned is that the Phillips Co. is not reliably flat. So turning first to structural changes, there is a substantial risk that more volatile supply shocks of the pandemic era will persist. Despite a considerable easing of pandemic-related supply pressures, the restructuring of global supply chains that was intensified by the pandemic and war, coupled with geo-economic fragmentation, may cause ongoing disruptions to global supply. Many countries are turning to inward-looking policies, which raises production costs and, ironically, makes countries less resilient and more susceptible to supply shocks. As seen in the left chart, the number of new restrictions on trade and foreign direct investment imposed on EU countries has gone up markedly during the pandemic. EU countries have also increased their own restrictions on inbound trade and FTI. The increased physical and transition risks from climate change are also likely to amplify short-term fluctuations in inflation and output. Delays in achieving the Paris Agreement goals increase the risk of a disorderly transition and serious disruptions to energy supply, which could boost inflation sharply and create more difficult trade-offs for central bankers. The pandemic has also taught us that the Phillips Co. is not reliably flat. Evidence increasingly shows that non-linearities can arise and they can become more pronounced at high levels of resource utilization so that inflation is more sensitive to resource pressures. Difficulties in measuring economic slack may also make it harder for policymakers to gauge the point at which inflationary pressures will escalate. Now, these takeaways suggest that when it comes to policy strategy, it will be important to be more cautious about looking through supply shocks. Central banks may need to react more aggressively if the supply shocks are broad-based and affect key sectors of the economy or if inflation has already been running above target so that expectations are more likely to be de-anchored. They may also need to react more aggressively in a strong economy in which producers can pass on cost hikes more easily and workers are less willing to accept real wage declines. While the focus now is on high inflation, what we've learned about the Phillips Co. also has important implications for the monetary policy response to future periods of below-target inflation. Some refinement may be needed for the lower for longer strategies that typically involve maintaining policy rates at the effective lower bound until inflation reaches or overshoots its target. Now, to be clear, a lower for longer strategy certainly may be desirable under some conditions, especially when you have an economy that's in deep recession and chronically low inflation. But the pandemic experience suggests that policymakers should be more cautious about calibrating policy to generate a persistent fall of unemployment below the natural rate you start when inflation is only modestly below target, for instance, if it's between 1.5% and 2%. And there could well be a case for preemptive tightening under these conditions. If resource pressures appear tight, and there is material risk that new shocks, such as a fiscal expansion, could push the economy to overheat. By allowing for a more gradual pace of tightening, a preemptive approach would also reduce the financial stability risks likely to accompany a rapid exit from low rates. Refining monetary policy strategies also cause for adjusting the use of tools. Forward guidance is a helpful tool. And clearly, conditional promises can enhance the impact of monetary policy. But such promises should be tempered by escape clauses if developments unfold more differently than expected. The forward guidance provided by central banks during the pandemic may have been too much of a straight jacket and prevented a faster reaction to inflation surprises. The costs and benefits of quantitative easing should also be reconsidered. QE will likely remain a critical tool should central banks face circumstances like they did during the GFC period in which unemployment runs high and inflation low, even though policy rates have hit the floor. But there should be more wariness of using QE when employment has largely recovered and inflation remains only modestly below target. Maintaining QE in such circumstances increases the risk that the economy will overheat and that policy will be forced into a sharp U-turn. So when we consider the monetary policy of tomorrow, it's important to recall today's lessons. First, take a closer look at supplier shocks before deciding to simply look through them. Second, be careful about running the economy hot and be ready to act preemptively if it does, even if inflation isn't yet burning brightly. Third, make sure that forward guidance is coupled with escape clauses. And fourth, be more cautious about deploying QE outside of a recession. So to conclude, now is the time to face the three uncomfortable truths that I've outlined. Inflation remains sticky. Financial stresses could make price and financial stability a difficult balancing act. And more upside inflation risks will likely come our way. I am certainly heartened by the actions of the ECB and many other central banks. The actions they have taken to tackle inflation have certainly helped in bringing down inflation, even though it remains at a level that's higher than where we would like it to be. But we should keep in mind that the battle is not over and the battle won't be easy. Financial stresses may intensify and growth may have to slow more. Even so, we know that we can't have sustained economic growth without a return to price stability. The good news is that while inflation, while low inflation may seem elusive, it is certainly no stranger. And central bank actions can deliver it. Unlike the characters in Godot, we are not waiting for a potential stranger to arrive. We are inviting an old friend to return. Thank you.