Christine Lagarde, Boris Vujčić: Monetary policy statement

Good afternoon, the Vice-President and I extend our welcome to you at our press conference. We express our sincere thanks to President Nagel for his gracious hospitality, and to his staff for the impeccable organization of today's Governing Council meeting.

Today, the Governing Council voted to increase the three primary ECB interest rates by 25 basis points. The ongoing conflict in the Middle East continues to fuel inflationary pressures, and inflation is projected to stay well above the 2% target for an extended period. This move underscores our dedication to implementing monetary policy to stabilize inflation at our 2% goal in the medium term.

The baseline projections from our latest staff models anticipate headline inflation averaging 3.0% in 2026, 2.5% in 2027, and 2.1% in 2028. For inflation excluding energy and food, the projections are 2.5% in 2026, 2.6% in 2027, and 2.3% in 2028. Notably, inflation in 2026 remains the same as in June, while it has been revised upward for 2027 and 2028.

The economic growth baseline projection is 0.9% in 2026, 1.4% in 2027, and 1.5% in 2028. This is an upward revision for both 2026 and 2027, primarily due to the stronger-than-expected performance of the euro area economy. However, the overall outlook remains highly uncertain, with risks to inflation and economic growth.

In response to the energy shock, our updated staff scenarios demonstrate a wide range of potential outcomes for growth and inflation, depending on assumptions about its intensity, duration, and indirect effects. With today's decision, we remain well-prepared to manage the uncertainty caused by the conflict. Our monetary policy stance will be determined on a data-dependent, meeting-by-meeting basis, taking into account the evolving inflation outlook, associated risks, incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission.

We are not committed to a specific rate path. The decisions made today are detailed in a press release available on our website. I will now provide a more detailed analysis of how we view the economy and inflation, followed by our assessment of financial and monetary conditions.