Accompanying annex to the speech
I am very pleased to be back in Brussels for our regular exchange.
Since our last hearing in June, the ECB has made further progress in its efforts to bring inflation back to its 2% medium-term target. In order to reinforce progress towards our target, we decided at our latest meeting to raise the three key ECB interest rates by 25 basis points. And, based on our current assessment, we consider that our rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.
In my short remarks today, I will outline our latest assessment of the outlook for the economy and inflation and explain our latest decisions. I will also briefly address the two topics selected by this Committee for today’s hearing: excess liquidity and the fiscal-monetary policy mix.
Outlook for the euro area economy
Euro area activity broadly stagnated in the first half of 2023, and recent indicators point to further weakness in the third quarter. Lower demand for euro area exports and the impact of tight financing conditions are dampening growth, including through lower residential and business investment. The services sector, which had been resilient until recently, is now also weakening.
The labour market has so far remained resilient despite the slowing economy, with the unemployment rate staying at its historical low of 6.4% in July. But while employment grew by 0.2% in the second quarter, job creation in the services sector is moderating and overall momentum is slowing.