 Good afternoon, everyone, and welcome to the European Central Bank, at least virtually. My name is Gabriel Gluckler. I'm a principal advisor in the communications department here at the bank, and I have the privilege of being your moderator for the next hour in this seminar. Of course, rising prices are on the minds of most Europeans. It's a source of worry and real economic pain, and that's why we were discussing today what's behind it, what's keeping inflation high, what we at ECB can do about it. We're looking forward to your questions and to have really have an open dialogue about this, and I'm sure we're going to have a very fruitful discussion on these very important issues. Before moving to the presentations to present us here, which I will introduce in a minute, let me go through a few housekeeping steps. First of all, please keep your microphones muted unless you're speaking. You're also encouraged to keep on your cameras. It gives a nice friendly atmosphere in this seminar. Please be aware that this seminar is being recorded, and we will be publishing it on our website in the coming days. And if you have any experiencing technical problems, please write to the host in the chat box, and then a member of our team will be with you and assist you right away. Now, I'm very pleased that we are joined here today by two experts on precisely that topic. The first one is Oscar Arthur, who is the Director General of Economics here at ECB, and with us is also Sarah Holton, who is the Head of Division of Prices and Costs also in Director General Economics. You are in very, very capable hands on this important topic, and for any questions that you have, and with this, over to you. Thank you very much, Gabriel, and good afternoon to everyone. It's our pleasure to be here and to have this opportunity to interact with members of our civil society to reflect on issues that are, of course, of common interest for all of us. Today's talk on inflation is for us a good opportunity to explain what we think about the underlying inflationary forces to share with all of you our diagnosis of the situation in terms of the potential evolution of prices in the future, but also to explain a little bit what are the decisions and the actions taken by the ECB to counter this inflationary bust. So as Gabriel said, I'm in the very good company of my colleagues, Sarah Holton, who is the Head of the Prices and Costs Division and has one of the main experts in inflation related issues at the Economics Department of the ECB. So in order to introduce the topic, the question, and hopefully later on the conversation, we have prepared a few slides that I would like to share with all of you. So in terms of the origins of the inflationary, the current inflationary episode, I mean, what is behind this inflation episode? Well, I think it is fair to recognize that the current situation is the result of the conjunction of a sequence of various shocks, some of them coming from the supply side, but also with a component of demand pressures. I mean, this is the result of a series of exceptional disturbances hitting the euro area economy. I mean, after the pandemic, the recovery that took place after the initial phase of the pandemic, after the lockdowns, gave rise to some imbalances between supply and demand in several segments of the goods and services market. As a result of that, we saw some disruptions in supply chains in international trade, giving rise to the so-called bottlenecks. These bottlenecks in the provision of some goods and services essentially led to high prices for these goods and services. So this was an initial symptom of growing underlying inflationary pressures. Later on, what we saw is a rapid increase in energy costs, even before the outbreak of the unjustified war of Russia on Ukraine. We already saw in 2021 some significant increases in energy costs. But of course, after the beginning of the war, this situation wasn't significantly, and the prices of most energy inputs went up very quickly, as you all know. And this had direct consequences in terms of prices, but given that energy is an input for the production of many other goods and services, we also saw some spreading out of this inflationary shock in the prices of many other goods and services. Then the demand was recovering, as I said before, at different pace, depending on the different segments of goods and services. In some cases, what we saw, and we are still seeing some of this, is the release of some pent-up demand that was accumulated during the lockdowns. And the reopening of the economy gave rise to this release of pent-up demand. And still today, we see a very strong demand component in the inflation dynamics of some services, especially those that benefited most from the reopening of the economy, like tourism-related activities, hospitality, restaurants and so on. It is fair to say that it was not only the big size of the shocks that led to a very significant increase in prices, but also what we saw was a very fast, very quick transmission of these shocks into final prices. The speed of the transmission of these shocks into final prices was probably higher and faster than what we saw in some previous episodes of inflationary pressures. This explains this extremely high velocity in the transmission of these shocks into the prices of goods and services in the customer's basket. So last year, in 2021, as it is illustrated in the chart in this slide, much of the dynamics of overall inflation was driven by energy, the red bars in this picture. Lately, starting from the first quarter of this year, we have seen a very significant slowdown in energy inflation. And at this stage, energy inflation is close to zero, and it has been even negative at some point. Well, in the absence of new shocks, we would expect energy costs to remain at relatively moderate levels. Next slide, please. But as I said before, it's not only a story based on a series of supply shocks. What we have seen at the same time is that the recovery of demand has contributed to add some further inflationary pressures as well. And in some cases, this strong reward in the demand is the reflection of the accumulation, the significant accumulation of savings during the pandemic. That have sustained this strong demand in some goods and services and discontinuity to maintain a relatively high inflation grade. This picture in this slide shows how quickly and how intensively the original inflationary shock has spread to the vast majority of services and goods in the consumers' basket. Just to recall that at the end of 2021, that is less than one and a half year ago, more than 50% of the goods and services in the basket were still having prices. The growth of their prices was still below 2% for half of the items in the basket. Now at this stage, as you can see there, the vast majority near 90% of total items in the basket are experiencing price growth that is above 2% and even 4%. So the vast majority of the items in the basket are growing at significantly higher rates. So next slide please. So we pay a lot of attention at the ECB to the different metrics of what we call underlying inflation, which typically captures the most stable and persistent component of inflation dynamics. I mean these are typically those goods and services whose prices move more slowly, contrary to what happens with the most volatile elements in the basket like food and energy that we know move very, very quickly. So for us it's very important to look at the evolution of prices of these other goods and services because they provide a very useful signal about potential future inflation dynamics. And what we are seeing by examining a relatively large battery of underlying inflation indicators is that first, all these metrics that focus on different aspects of this underlying inflation dynamic process, all these indicators are telling us that underlying inflationary pressures are still at very high levels. And even though we are seeing some of these indicators easing, some of them seem to be low enough and some of them even have dropped in the last few months. But still the level of underlying inflationary pressures according to basically all of these indicators is still at historically high levels. And this is of course an element of concern because this means that inflation which has been too high for children is probably going to remain above our medium term target of 2% for some time still. Next slide please. So in parallel to these let's say more exogenous shocks or perturbances related to energy related to food more recently and demand factors what we have seen from the side of income sources is that both wages and unit profits have contributed to the acceleration of inflation. In particular unit profits have contributed significantly to the acceleration of inflation in the last few quarters. This has probably been possible because demand in some sectors has been very strong relative to supply capacity that in some cases has been reduced constrained by this sort of bottlenecks that I referred to before. In some other cases, we know that whenever inflation is very high for everybody is relatively easier for firms to pass through the increase in the cost without facing significant decreases in their market shares. And certainly the shock to inflation to energy prices has facilitated this rapid reprising by my firms that in some cases may have allowed them even to not only to maintain their profit margins but also in some sectors in some particular parts of the economy even to increase their profit margins. So this component unit profits as I said has contributed significantly in the last few quarters to the acceleration of domestic prices. Now looking forward we expect some moderation precisely because some of these factors that have pushed up unit profits like this imbalances between supply and demand in some sectors, the high cost of energy are temporary factors. Indeed energy costs as I said before have normalized significantly but still for the time being this is an important driver of domestic prices in inflation. And the other important element, next slide please, of course is wage growth. I mean for many years wages grew at very modest rates in the euro area for the last decade before the COVID rate we know that wages were relatively flat, relatively subdued. They wouldn't react much to shocks to the economy but this situation changed after the COVID, after the pandemic. In the last year or year and a half we have seen some strong acceleration in wage growth and indeed we are still in a period in which wages keep accelerating. And this of course is one of the elements that is contributing and will contribute for some time to strengthen this underlying inflation dynamics. Next slide please. So, looking forward, how does the outlook for inflation looks like? Well we are the ACB and I guess this is true for many other analysts and institutions. We pay a substantial amount of attention to indicators about future inflation expectations. These are good references for us in order to learn what economic agents are thinking about the future evolution of inflation. And we look at the wide set of inflation expectations indicators. Some of them coming from the consumers, some of them coming from the firms, some of them coming from market participants. We also run some specific surveys to learn how people think about the future evolution of prices and inflation. And the signal that we get from this wide battery of indicators of future inflation expectations is pretty clear. Most agents, all agents, all groups of agents are essentially telling us that they expect some significant reduction in inflation rates. So that most indicators of inflation expectations in two, three years time are very close to our medium term inflation target of 2%. But it is true that this inflationary process will take some time. But it is remarkable that in spite of the very, very significant shocks that we have received over the last couple of years with very high inflation rates, at some point even above 10%, medium term inflation expectations held by most agents are relatively well anchored around this medium term reference of 2%. Next slide please. So this picture in this slide summarizes I think in a very clear way what has been the recent narrative about inflation in the euro area and also contains some useful information about how we see inflation evolving in the coming years. The story of inflation in 2022, as I said at the beginning of the presentation, is very much a story based of the huge energy cost shock. Half of inflation rate in 2022 can be attributed to this rapid increase in energy inflation, the green bar in this picture. Now in 2023, I mean, unless there are new shocks, which in principle we are not discounting significant costs on the energy front, but the situation is not fully normalized. But in principle the scenario for energy supplies is better than in 2022. Energy inflation should be very, very small this year. However, as you can see there, food inflation is still contributing very significantly to total inflation. And this is going to be the case for the coming months as well. And now this year as well, what we are seeing is that what we call the HICP excluding energy and food, which is our most popular metric of core inflation, one of the key components of underlying inflation, is accelerating, is gaining traction. And this captures the prices of non-energy industrial goods and services mainly. So for some time we will see still relatively high inflation rates for goods and for services. To some extent reflecting the accumulated inflation pressures in the pipeline of the production processes of these goods and services. So it will still take some time for these accumulated pipeline pressures to be fully transmitted into the final prices of goods and services. And this will explain that core inflation, which is receiving a lot of attention in the media and in the reports of the analysts, will be still relatively high for some time. Later on, in 24 and 25, we should see, according to our forecast, we should see some further normalization in all components of inflation. And in particular, we should observe some moderation of core inflation. This again, in the absence of new shocks to any of the consumer basket components, this should allow the inflation, the inflation, the headline inflation rate to get back to levels very close to our 2% interference by the end of 2025. Next slide, let me just finish with mention on what the ECB is doing, has been doing over the last one year and a half to tame this inflationary episode. I mean, we started to change our view on the appropriate monetary policy stance at the end of 2021 when the Governing Council of the ECB already communicated its intention to discontinue the pandemic program for asset purchases. And since then, there has been a very, very significant increase, as you all know, in our main policy interest rates references. Actually, since the first interest rate hike that took place in last July until now, interest rates have gone up by 375 basis points, which is a very significant and very quick tightening cycle. In this picture, you see how different references for short-term and long-term interest rates have changed since December 21 until now. And you can see that there has been a very, very significant increase in these interest rates references. At the same time, the ECB has made important decisions pertaining to the management of its asset purchase programs. Initially, we stopped the net purchases of assets and in the last Governing Council meeting that took place a few weeks ago, the Governing Council decided to stop reinvesting the mature insecurities of its main asset purchase program, the so-called APP. So all these decisions are the reflection of the strong determination of the ECB to deliver on its mandate and to facilitate the convergence of inflation to 2% in a timely manner. So my last slide is just to illustrate, can you move forward? It's just to illustrate that monetary policy is transmitting quite swiftly and smoothly and strongly to the main prices in the financial sector. What we are seeing is that the interest rates of loans for firms or for households are adjusting in accordance to the rise in our policy interest rates. And this is already having some contractual impact in terms of the evolution of credit, which is a necessary ingredient to moderate demand as a prerequisite to moderate inflation and to finally arrive to the point at which we all want to arrive in a timely manner, which is one in which prices grow at a significantly lower pace than the current one, in line with our medium-term target of 2%. So let me stop here and happy to take some questions. Thank you, Oscar. Thank you for this very interesting and comprehensive presentation. We now go into a conversation and a discussion with questions, with answers, hearing your views. I know it's been a lot of information to digest, but let's get going. If you would like to ask a question and then please raise your electronic hand until I call you and then unmute yourself and that you can ask your question and then we try to answer them. If at the end of this session we don't have time for all of your questions, please do write them in the chat and we would all follow up later on. But maybe we start first with the first question here, Dara Turnbull of Housing Europe. Please, Dara, what would you like to put to our panelists? Thanks. Thank you for the presentation. I have two questions. The first one is that we see and as you mentioned unit prices or unit profits have increased due to scarcity primarily in the market. What I'm wondering is that is there now a risk that given that producers have seen that those profits are tolerable to consumers, that those prices, those higher prices become embedded within markets even as supply chain issues and other issues they're causing scarcity decline. The second question I have is related to the impact of housing costs. Of course in HICP we don't measure the only occupier cost of housing. It's a separate piece of work produced by Eurostat, for example. But I'm wondering to what extent issues like higher interest rates, particularly from mortgage holders are being considered by the ECB in terms of their outlook for where interest rates need to go and how housing costs outside of HICP are factored into your equation. Thanks a lot. Oscar, how are you? Well, thank you. Thank you very much for this very, very interesting question. On profit, on profit margins or unit profits, which is our most preferred measure to think about this issue. I mean, in principle we maintain the view that in spite of this strong rebound in unit profits that we have seen over the last few quarters, we expect some moderation of unit profits as we go further into our projection horizon. Why? Well, essentially because the main factors that have pushed unit profits up we think are of temporary nature. Let me mention again the two or three main factors that are allowing firms to or many firms, not all of them, but many firms to maintain relatively strong unit profits. Well, in some cases this was due to bottlenecks that restricted the supply of some goods at a time at which the demand for those goods was quite strong. This was the case with many industrial goods. Now we know that bottlenecks are recent. That transportation and logistic change are normalizing quite fast, I would say in the last few quarters. Also this artificial reduction in supply is probably losing some relevance. This factor should probably be less important when thinking about the future evolution of profits. Another important factor was the situation in which energy prices went up very, very quickly. This we think could have facilitated that many competitors would rise their prices because it was relatively easy to justify in front of their customers that they rise their prices because energy was very high and so on. This situation has changed also quite significantly. Now we are not in a normal situation of course in terms of the energy context has improved significantly with respect to what we had just before the last winter. So now I guess it's going to be more difficult to go for this kind of across-the-board increases in prices based on the justification of very high energy costs. The third element which is perhaps going to have some more persistence has to do with the very strong rebound in the demand for some services. Those services that I mentioned before that are benefitting more from the reopening of the economy, traveling, tourism related activities and so on. We know that the demand is being very, very strong. Probably there is a very important component of pent-up demand there. This is drawing a context in which for firms it's quite let's say easy to set relatively high profit-unit profits because demand is very strong and supply at least in the short time is relatively constrained. This element is still pushing up prices I think. But in our forecast we expect the unit profits to moderate as long as these three factors lose some momentum. On housing-related issues as you rightly mentioned, I mean the HICP produced by Eurostat there is not an explicit component capturing the owner-occupied housing cost. So this is not in our reference for inflation. The main reason why we don't take into account in our reference the evolution of housing prices, essentially because housing prices has an important component of an asset which is likely to be sensitive with respect to changes in the interest rates of course. But being an asset is not something that goes straight into our price reference. The housing market is an important channel of transmission of monetary policy. We know that because typically it's very sensitive with respect to changes in financing conditions and this is why we are monitoring especially this market, this part of the economy because it's a good leading indicator of how our monetary policy is transmitting to the rest of the economy. This is, I think, what I can tell you about that particular issue. Okay, thank you Oscar. The next question is Anna of Burke, the European Consumer Organization. Anna, over to you. Thank you very much and very interesting presentation. I had a question actually on the banking sector specifically because you well explained that inflation passed very quickly onto consumers including in market credits and so on. But what we observe is that the profitability of banks is not passed on to consumers in terms of higher interest rates on saving accounts or lower charges for payment accounts, these kind of things. So I'm wondering is that something you are observing, assessing? Do you have data on this? And is there something where you see European Union could take action to mitigate this? Unfortunate situation for consumers? Well, that's a good question. Anna, thanks a lot for it. Of course, we monitor very closely the transmission of our monetary policy through the banking sector especially because the banking sector in the euro area economy as you know very well is a first order channel for the transmission of our monetary policy. It's probably the most important transmission channel or one of the most important ones. I mean what we have seen is that initially the increase in the interest rates transmitted very swiftly, very smoothly to the loans rates to the interest rates paid by borrowers. They also transmitted very quickly to the interest rates that banks have to pay themselves to get some financing from the capital markets. But you are right, initially we didn't see a proportional increase in the cost of deposits. This is changing, I would say. I mean according to the latest data we have seen some positive reaction in the interest rates paid by banks on deposits. Of course with some important differences. Oversight deposits still pay very, very low remunerations but time deposits are seeing some more significant increases in their interest rates. And we are seeing a very natural composition effect with more customers moving their money from overnight deposits into time deposits. So the average interest rate paid on deposits is going up. Maybe not as quick, not as much as many bank customers would wish. I would agree with you. But it's not something that the ECB can control directly. This is at the end, this is something that is controlled by the banks that is subject to the competition within the banking sector. And in principle it corresponds to the banks to set the rates on their deposits. It's not something that we can control directly or that is a target variable for us. It's an important one because it's part of the transmission of our monetary policy but it's not something that the ECB can control directly. Nor we have specific competencies on that particular matter. I would say that liquidity conditions are still very favorable so that there is still a lot of liquidity in the system. But in principle we would expect some fall in this liquidity and part as the ECB reduces the size of its balance sheet and absorbs some of the liquidity in the system. And as this happens my intuition, my hunch is that we would probably see some rise, some additional increase in the interest rates paid on deposits. But this is not something that we can control directly. Thanks Oskar. And the next question is from Kuba Gogolevsky of Greenpeace. Kuba, over to you. We don't hear you. Do you hear me now? Yes. Given that last year there had been a decrease of oil, gas and electricity use in Europe and you've shown that energy was an interesting component of inflation, do you have data how much the decrease in demand has been contributing negatively to inflation? And the same, we have now a target on the EU level also for the decrease, 15% of increase of gas demand use, right, that translates to 60 BCM. Do you have indication or data how much the reduction on demand correlates or translates into decreased inflation forecast for 2023? Thank you. Thank you very much, Kuba. I'm not aware of any specific estimation of the impact of the fall in the demand for the different energy inputs on their prices. In some cases because the prices of these energy inputs are set at the level of the global international markets. So they do not only depend on the evolution of demand by European consumers. But what is true is that we have seen a significant drop in the demand, for instance, for gas by EU consumers. As far as I remember, according to some estimates by the European Commission, we have seen a 20% drop in the total consumption of gas with respect to the previous year, which I think is a remarkable important effort by all EU consumers, that certainly goes in the right direction. As a consequence of a combination of some policies that were there to facilitate or to incentivize the reduction in consumption, but also we cannot forget that this significant reduction in gas consumption has been probably possible also because of good luck, because we had this relatively mild winter. For sure all this has facilitated some further reduction in the prices of gas. I mean, to which extent this is driven by the demand of European consumers, that I cannot answer directly because it's quite a globalized market and the supply comes not only from Russia, but from an increasing number of suppliers. But certainly the contention of the demand, the restraint of the demand, which I think is good news overall, has for sure contributed to moderate the cost there. Okay, thank you. The next question is from Lukas Krebel of the New Economics Foundation. Lukas, over to you. Hi, thanks very much for this presentation. So I have two related questions I think about the supply side character of this crisis and the ECB response. So first is, so given the inflation episode as you showed, it was mainly driven by the shocking energy prices, mainly gas prices and how they transmitted to the wider economy. So now we reach the point that, you know, some base effects start to come into play like, you know, once we are more than a year since the price shock happened in order to base price level that we calculate pressure on will by itself lead to reduction in the rate. And then the second thing, like as you also mentioned, the energy prices and gas prices have been coming significantly down. So we would expect the inflation rate to start to reduce by that. So to what extent you see it's simply not a matter of those two things materializing like the base effects and the energy input prices falling significantly down. Highly impact on inflation rate going eventually down. To what extent you think that the ECB response of higher interest rates has driving this fall in inflation when it's so much to do driven by supply side. And so mentioned, you know, there was very quick, like first order impacts like the loan interest rates and so on. But as we know, you know, this is famous sake of long and variable lacks about how long the policy takes to trust with the real economy. So we're very interested to hear your thoughts about to what extent you see this tightly placed major role in that crisis. And a quick related one to that. So since, you know, energy input was such a driver of this crisis, so we had obviously energy supply issue while also the EU has planned to move towards cleaner energy system. So the ECB considered that, you know, the policy response should try to address the supply side in some way rather than focus on demand such as, you know, inflation was not really driven by demand, but to start with at least. And, you know, and then if interest rate hikes constrain, you know, finance or low rates to fix like energy efficiency or clean energy. So how we could actually reduce demand for this very volatile input or fossil energy, would you not consider like the better policy response would be of dual interest rate policy when we want to maintain cheap interest rates for the fix that will help to reduce our demand of this very volatile input that has divided inflation. Thank you. Thank you. Thank you. Thank you very much. Lucas interesting, but tricky, tricky issues. No, the first one, I think you are absolutely right. I mean, what we have seen in terms of the moderation of energy prices is not much to do with the response of the ECB's monetary policy. I mean, this reduction in energy costs have to do more with the normalization of supply, with the substitution of deliveries from Russia and gas from other providers and so on. I mean, it's not monetary policy for sure. Not that the capacity of monetary policy to counteract supply shocks is very limited. I mean, especially in the short run, there is very little to be done on that. Still, I think the key question here is, and it's a fair question. So why if this is originally a supply shock, why is the ECB tightening? It's monetary policy. I mean, my reading of your underlying question, in a sense. Well, I guess there are two or three reasons here. First of all, as I said before, I mean, even though the most visible shocks triggered in this inflationary episode are located on the supply side, energy, bottlenecks and so on. I mean, as I said before, I mean, it is undeniable that there is an important, significant demand component there. So it's not only in the story of supply. Demand has been quite strong, especially after the reopening of the economy. And monetary policy can't and should act through demand. So it's not only supply, it's demand and this, in a sense, justifies the kind of restrictive policy that we are implementing. But also, even if the origin of the shock is located on the supply side, I mean, we know we have to avoid at all costs an scenario in which inflation expectations become the anchor. And they may become the anchor just because of an initial supply shock. But it is our job to keep these inflation expectations well anchored because we know that the alternative would be much more detrimental in terms of growth, employment and social welfare. So this again justifies a swift reaction by the central bank in order to keep inflation expectations well anchored. So even though we cannot do much in the short term to moderate the inflationary impact of energy shocks or other supply side shocks, I think that in the current circumstances it is very much well justified and a strong reaction by the central bank. First of all, to moderate the inflationary pressure coming from the demand side. And second, to keep inflation expectations well anchored around our 2% target. On the second issue, Lucas, if I got it correctly, in a sense you are questioning whether it would be preferable to keep interest rates low to facilitate, let's say, policies heated towards the green transition, not the energy transition. Is that right? Was that the question? Yes, to clarify, yes. Given the ECB's primary mandate, so given how energy shocks, I mean it's not the first oil and gas shock that the Western World experienced, this energy will always be volatile. So considering that, should the ECB consider policy that might take interest rates low for transition, not just for the climate goals, but also to reduce our reliance on volatile fossil energy and, you know, high price stability in that way? Well, I mean, there is a very strong logic in your conjecture. But let me just re-emphasize that the ECB has a very clear mandate for good reasons, which is a mandate on price stability. And in order to deliver on that mandate, this mandate is, of course, well grounded, as I said just a couple of minutes ago, on the idea that preserving price stability is the best service that a central one can do in terms of providing the best possible conditions for sustainable growth, employment creation, and social welfare. So our mandate is to keep price stability. It is for other actors to probably lead this transition towards greater energy mix. We know that the ECB is very much supportive of this green transition and without prejudice of our main mandate on price stability, the institution is supporting wherever it can, and again, conditional on not running against its primary mandate on price stability, is favouring this green transition. But it is for other actors to lead with the appropriate tools that we lack here at the central bank to promote this transition. And I think that in this respect it is for other actors that are much better equipped than we are to steer this transition. And interest rates are only part of the equation. I think there are other more important tools to facilitate this transition that we all wish to take place in a timely manner. Thanks a lot, Oscar. So far we don't have any further raised hands. If there are any... Oh, there's Jordi. Jordi has raised his hand. Jordi, can you... Yeah, get on the screen. Great. Yeah, thank you. Can you hear me? From positive money, yes, I understand. Yes, we can hear you. Okay, perfect. Thank you very much. Yeah, you have said multiple times today that you see the man also being an important player and you see the man being too high. And I listened to a speech by Philip Blaine not long ago and he has a nice slide where he shows that private consumption and total investment are right now just slightly above 2019 levels in real terms. So on what indicators are you raising your claim that demand is high or a driver of inflation? I would be interested in your answer. Thank you very much. Well, that's a fair point, Jordi. I mean, when assessing the inflationary component coming from demand we have also to take into account what is the position of the supply schedule. What are the supply conditions? And you are right. If you look at the absolute levels of consumption and investment one would conclude that we are not above, significantly above pre-COVID levels. But we have to take into account that for most part of the recovery period of the recent recovery period and for most part of the inflationary episode supply conditions have been quite constrained. We're thinking about bottlenecks in the industry. We're thinking about some services are still being constrained by pandemic related measures and so on. This means that the supply side was not working at full capacity. So this means that even if demand was not above the level prevailing before the pandemic, the inflationary pressure was relatively high because supply in some of these sectors was not sufficiently elastic due to this combination of supply bottlenecks, high prices of energy, other commodities and so on. And this is undeniable when you think about some specific sectors. As the sectors I mentioned before, those sectors are benefiting now from the reopening of the economy related to services close to tourism and so on. I think it is undeniable that there is a very, very strong demand component there which is driving prices up. The question of identifying with precision which part of inflation is supply and which part of inflation is demand is always a very tricky one. Our experts have tried to decompose the different components and the diagnosis is clear. At the beginning of the episode it was mainly supply, but as the economy reopened demand factors played a very significant role. Another aspect in which you can see that supply is relatively limited given the ongoing demand dynamics is the labour market. We have plenty of information coming from corporates telling us that they are facing significant labour shortages in many sectors of the euro area economy. So there is lack of the economy. The unused capacity of the supply site is probably very limited given the ongoing demand conditions. Thank you very much. Oscar, are there any further raised hands? I don't see any at this moment in time. Maybe Sara wants to... Some final comments before we wrap up. Sara, yes, please. Thanks a lot. It was really useful for us to hear your questions and just to say that a lot of the issues that you raised about the banking sector, about the housing market, about demand, about supply are things that we really look at on a daily basis here. I think for us in projecting forward for the economy what's really key is looking at how our monetary policy measures are going to work on all of those aspects. The last point that we had there on demand I think is a crucial one. So while, of course, monetary policy works with long and variable lags, we do see over a projection horizon that it will dampen demand and bring prices back down to our target. Now, of course, the Governing Council meets every six weeks for good reason that we have to respond to new information coming in and we take account of all of these factors into our models, into our judgement around those models and we're constantly changing, adjusting, addressing all of these issues. So, I mean, for me, I think just as a wrap up, we've listened also very carefully to the points that you've raised here around all of these issues. I would invite you all to keep an eye on our website for communications on this. I mean, our colleagues in the ECB are working very hard on all of these issues, how, say for instance, climate change is impacting inflation, how bank lending conditions are going to affect households and firms and we try to communicate on this as much as possible. So from my side, I'd just like to thank you all for the dialogue. It's been very useful for us and we're always happy also bilaterally to communicate on any of these aspects in the future. Thanks, Sara. Oscar? No, that's fine. I mean, just to re-emphasize what Sara just said, I mean, for us it's very useful to have these dialogues and to have these exchanges with our fellow citizens and thank you very much for the attention and in particular for the very high quality of the questions that went really to the core of our main concerns these days. So thanks a lot. Thank you very much. Thank you very much, Oscar. Thank you very much, Sara. Before you leave, can I ask you to answer a couple of questions in a feedback survey? We should be appearing on your screen. That survey will help us to make these kind of exchanges better. It's completely anonymous, of course, but it helps us a lot to develop this further. And while you're filling the survey, I would like to thank Sara and Oscar very much for the time they spent and thank you also to you, as mentioned before, for your very valuable contribution and question. Thank you very much indeed.