ECB Decision: Lagarde on Interest Rates, Inflation, Economy, Risks

Monetary Policy Stance - The ECB governing council decided to keep the three key ECB interest rates unchanged [1][21] - The ECB will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance [3][22] - The ECB is not pre-committing to a particular rate path [4][22] - The ECB stands ready to adjust all instruments within its mandate to ensure inflation stabilizes sustainably at the 2% medium-term target [23] Inflation Outlook - Headline inflation is currently around the 2% medium-term target [1] - ECB staff projects headline inflation averaging 21% in 2025, 17% in 2026, and 19% in 2027 [2] - Inflation, excluding energy and food, is expected to average 24% in 2025, 19% in 2026, and 18% in 2027 [2][13] - Annual inflation edged up to 21% in August from 2% in July [10] Economic Growth - The economy grew by 07% in cumulative terms over the first half of the year [5] - The economy is projected to grow by 12% in 2025, revised up from the 09% expected in June [2] - The growth projection for 2026 is now slightly lower at 1%, while the projection for 2027 is unchanged at 13% [3] - The unemployment rate was 62% in July [6] Financial Conditions - The average interest rate on new loans to firms moved down to 35% in July from 36% in June [20] - The cost of issuing market-based debt was unchanged at 35% [20] - Loans to firms grew by 28%, slightly more strongly than in June, while the growth of corporate bond issuance rose to 41% from 34% [20] - The average interest rate on new mortgages was again unchanged at 33% in July, while growth in mortgage lending picked up to 24% [20]