ECB's Lagarde is speaking at the Hearing of the Committee on Economic and Monetary Affairs at the European Parliament and comments:

Euro Area Economic Outlook

  • The euro area economy showed resilience, growing 0.7% in the first half of the year, supported by domestic demand.

  • Growth was uneven: frontloading of trade boosted Q1, but higher tariffs, stronger euro, and global competition weighed on Q2 and are expected to limit growth short term.

  • Services sector remains strong, offering underlying momentum.

  • Labour market is holding up, supporting consumer spending despite softening demand.

  • Past ECB rate cuts and government spending on infrastructure and defence expected to support investment.

  • Growth forecasts: 1.2% (2025), 1.0% (2026), 1.3% (2027).

  • Risks to growth have become more balanced, with downside risks from trade tensions and upside potential from reforms and spending.

Inflation Outlook

  • Inflation close to 2% target (2.2% in September; core at 2.3%).

  • Real wages recovered to pre-inflation surge levels; wage growth moderating (3.9% in Q2 vs. 4.8% last year).

  • Projections: 2.1% (2025), 1.7% (2026), 1.9% (2027).

  • Inflation ex-energy/food: 2.4% (2025) → 1.8% (2027).

  • Risks remain from volatile global trade environment, but the range of risks has narrowed.

Monetary Policy Stance

  • Disinflation process is over; inflation expected to remain around 2%.

  • ECB kept interest rates unchanged at last meeting.

  • Policy remains data-dependent and meeting-by-meeting.

  • No pre-commitment to a rate path—decisions will be based on inflation outlook, underlying dynamics, and transmission strength.

Source: Investing Live