Monetary policy statement

Good afternoon, the Vice-President and I welcome you to our press conference. I would like to thank President Nagel for his kind hospitality and express our special gratitude to his staff for the excellent organisation of today’s meeting of the Governing Council. 

The Governing Council today decided to raise the three key ECB interest rates by 25 basis points. The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period. Today’s decision underscores our commitment to setting monetary policy to ensure that inflation stabilises at our two per cent target in the medium term. 

The baseline of the new ECB staff projections sees headline inflation averaging 3.0 per cent in 2026, 2.5 per cent in 2027 and 2.1 per cent in 2028. For inflation excluding energy and food, the baseline foresees 2.5 per cent in 2026, 2.6 per cent in 2027 and 2.3 per cent in 2028. Compared with June, the baseline projection for inflation in 2026 is unchanged, while it has been revised up for 2027 and 2028. The baseline projection for economic growth is 0.9 per cent for 2026, 1.4 per cent for 2027 and 1.5 per cent for 2028. This is an upward revision for both 2026 and 2027, mainly reflecting the greater than expected resilience of the euro area economy. 

The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth. In relation to the energy shock, the updated scenarios put together by staff illustrate the broad range of outcomes for how growth and inflation would evolve under different assumptions about its intensity and duration, as well as its indirect and second-round effects. 

With today’s decision, we remain well positioned to navigate the uncertainty caused by the conflict. We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path. 

The decisions taken today are set out in a press release available on our website. 

I will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions.