Lagarde's statement after ECB policy meeting

Economic Growth and Consumer Spending - The economy grew by 0.7 per cent in cumulative terms over the first half of the year, driven by resilience in domestic demand [2] - Manufacturing and services continue to grow, indicating positive underlying momentum in the economy [1] - The unemployment rate was at 6.2 per cent in July, suggesting that the labour market remains a source of strength [1] Inflation Outlook - The new ECB staff projections indicate headline inflation averaging 2.1 per cent in 2025, 1.7 per cent in 2026, and 1.9 per cent in 2027 [5] - Annual inflation edged up to 2.1 per cent in August from 2.0 per cent in July, with energy price inflation at -1.9 per cent [9] - Inflation excluding energy and food remained constant at 2.3 per cent [9] Monetary Policy and Interest Rates - The Governing Council decided to keep the three key ECB interest rates unchanged, with a focus on stabilizing inflation at the two per cent target [6][16] - Interest rate decisions will be based on the assessment of the inflation outlook and incoming economic data [4][16] - The average interest rate on new loans to firms decreased to 3.5 per cent in July, down from 3.6 per cent in June [15] Investment and Government Spending - Investment is expected to benefit from past interest rate cuts and substantial government spending on infrastructure and defence [1] - The growth of corporate bond issuance rose to 4.1 per cent from 3.4 per cent, indicating increased investment activity [15] Risks and Challenges - Higher tariffs, a stronger euro, and increased global competition are expected to hold growth back for the rest of the year [7] - Geopolitical tensions and trade relations remain major sources of uncertainty for economic growth [13] - The outlook for inflation is more uncertain due to the volatile global trade policy environment [14]