Compared with the June 2022 Eurosystem staff Broad Macroeconomic Projection Exercise, headline inflation has been substantially revised up in September by 1,3 percentage points to 8,1 percent for 2022, by 2 percentage points to 5,5 percent for 2023 and by 0,2 percentage points to 2,3 percent for 2024. Energy price inflation remained extremely elevated, at 38.3 per cent, and it was again the dominant component of overall inflation. Market-based indicators suggest that, in the near term, oil prices are likely to moderate, while wholesale gas prices will stay extraordinarily high. The relatively high import share of gas needed for the EU27 energy consumption will create extensive challenges in the winter months of 2023, especially in countries with gas-intensive industrial sectors. In fact, the recent Purchasing Managers' Indices (PMIs) in the manufacturing sector have dropped notably. Food price inflation also rose in August, to 10.6 per cent, reflecting higher input costs related to energy, disruptions of trade in food commodities and adverse weather conditions. While supply bottlenecks have been easing, these continue to gradually feedthrough to consumer prices and are putting upward pressure on inflation, as is recovering demand in the services sector. The depreciation of the euro has also contributed to the rising inflationary pressures, together with the aforementioned supply and demand factors. Governing Council latest meeting decision Against this background, in our latest meeting last Thursday, the Governing Council of the ECB decided to raise the three key ECB interest rates by 75 basis points.
In addition, thanks to the solid solvency buffers and the support of the Central Bank of Cyprus that relaxed temporally the capital and loan origination requirements, the banking system has supported the domestic economy by providing fresh lines of credit from January 2020 to June 2022 of 8,1 billion Euros. 2,6b euros have been granted to households for mortgages, whilst 1,6 billions and 0,6 billions have been granted to the Wholesale and Hotel Industries which have been affected severely by the pandemic. Nevertheless, all the banks need to remain cautious, prudent and active in order to confront a challenging period that lies ahead us. Whilst the first round effects from the geopolitical crisis has been up until now manageable, the second round effects have  5/6  BIS - Central bankers' speeches  not yet materialised and uncertainty in an environment with high inflation and weakened growth prospects is elevated. Adverse macroeconomic developments may deteriorate banks' profitability and asset quality, causing delinquencies and an upward trend in impairments and provisions. Interest rate normalisation policies may support the banks' revenue capacity through higher yields. However, they might fall short to balance out the structural deficiencies that would be magnified if the economic prospects follow an adverse route. It is therefore of pivotal importance for banks to adapt their business strategies to the new realities forged by the consecutive crises. And this would not be an easy ride as challenges emerge, often in unpredictable ways.