So far, wage increases had been moderate providing evidence that the price effects of the shocks had not become embedded in expectations. Financial stability was safeguarded. Financial markets have adjusted smoothly to the gradual pace of normalisation. To ensure that our monetary policy is smoothly transmitted across all euro area countries, this past summer the Governing Council established the Transmission Protection Instrument.
It was developed to counter any unwarranted market dynamics that could pose a threat to price stability. Risks of fragmentation have not materialised. The gradual policy normalisation aimed to avoid a potentially sharp contraction in output and an unwarranted rise in unemployment. Economic growth and employment have remained resilient despite the unprecedented shocks.