15 16  In particular, the range of the terminal rate estimated with our models is between 1.75% and 3%. See the September ECB Survey of Monetary Analysts. 17  See, for instance, Costain, J., G. Nuño, and C. Thomas, “The Term Structure on Interest Rates in a Heterogeneous Monetary Union", Banco de España Working Paper 2223, 2022. 7  longer maturities, causing a tightening in overall financing conditions over and above that implied by our policy rate path. Therefore, to achieve the same degree of tightening withour overall policy toolkit, short-term rates would not need to increase by so much. Similarly, the run-off of the outstanding TLTRO-III operations in the next two years will entail a significant reduction in the size of the Eurosystem balance sheet, which may also contribute to the normalisation of our monetary policy stance. In this case, however, markets are probably already expecting this automatic reduction in the size of the balance sheet stemming from TLTRO-III. These considerations point to the need to reflect upon the right combination of interest rate increases and quantitative tightening in the coming quarters. Conclusion Let me conclude. There are a few key takeaways from today’s talk that I would like to emphasise. First, euro area inflation has risen mainly due to energy (and food) shocks outside of our control. This does not mean that we at the ECB Governing Council should remain idle. We should continue normalising our monetary policy in order to avoid the emergence of secondround effects and a de-anchoring of inflation expectations.
29.09.2022  Monetary policy in the euro area: where do we stand and where are we going? XXI Congreso de Directivos CEDE, Bilbao Pablo Hernández de Cos Governor  Your Majesty, authorities, ladies and gentlemen, Let me start by thanking the organisers for the opportunity to address you at this XXI CEDE Congress. Today, I will elaborate on how we can bring price stability back to European citizens in the context of current turmoil as it is the responsibility of the ECB’s Governing Council to bring inflation down to 2% in the medium term, the inflation target that operationalises our price stability mandate.1 And we have to do this in none too easy times. After a pandemic that has cost more than a million lives in Europe alone, and with a war of aggression in Ukraine, European households are experiencing a drastic surge in their costs of living. Consumer prices in the euro area rose by 9.1 % in August compared to the previous year, an all-time high for the monetary union. The increase in prices has been especially acute in the energy and food components of the consumption basket. But it has become more general over time, as reflected in an underlying inflation rate of 4.3 % in August, another record high, reflecting to a large extent indirect effects of higher energy and food commodity prices through firms’ production costs.