Live - ECB Governing Council Press Conference - 10 September 2026

Thank you very much, Wolfgang. And good afternoon to all of you. The Vice President and President Nagel and I welcome you to the press conference. I would like to particularly thank President Nagel as well as his entire staff for their kind hospitality and express our gratitude to all of them for the excellent organization of today's meeting of the Governing Council. I hope that you have felt that hospitality and that welcoming embrace by the Bundesbank. 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 stabilizes at our 2% target in the medium term. The baseline of the new ECB staff projections sees headline inflation averaging 3% in '26, 2.5% in '27, and 2.1% in '28. For inflation excluding energy and food, the baseline foresees 2.5% in '26, 2.6% in '27, and 2.3% in 2028. Compared with June, the baseline projection for inflation in '26 is unchanged, while it has been revised up for '27 and '28. The baseline projection for economic growth is 0.9% for '26, 1.4% for '27, and 1.5% for '28. This is an upward revision for both '26 and '27, 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. The economy proved resilient in the second quarter despite headwinds from the energy shock. Growth was broad-based across countries and sectors. This pattern is likely to have continued into the third quarter. Manufacturing continues to perform solidly as governments spend more on defense and infrastructure. Consumer confidence has rebounded from low levels, helping services recover from the initial energy shock. Increased AI-related activity is visible in digital services, business investment, and exports.

The labor market has remained robust, with the unemployment rate unchanged in July at 6.4%. Growth in employment and the labor force continues to slow, while productivity has gradually picked up. Looking ahead, the near-term growth outlook has improved compared with the last round of staff projections, reflecting in particular the resilience of private consumption and public spending. Over the medium term, consumption should be supported by gradually falling energy prices and a strong labor market. Growth will increasingly be bolstered by business and housing investment. Export growth should benefit from rising foreign demand, but is being held back by competitiveness challenges and uncertainty about global trade policies. Higher potential growth requires structural reforms and has to be underpinned by sound public finances. Simplifying and harmonizing rules across the EU's single market, accelerating the energy transition, and completing the savings and investments union are key building blocks. As the process for agreeing on the legal framework for the digital euro moves into its final stage, we reiterate the importance of reaching agreement on the single currency package as quickly as possible. Fiscal responses to the energy shock should be temporary, targeted, and tailored.

Looking now at inflation, inflation increased to 3.3% in August from 2.9% in July. Energy price inflation rose to 14.3% after 10.3% in July. This increase is likely to reflect in particular a strong contribution from refining margins on liquid fuels, as well as higher energy commodity prices. Food price inflation remained unchanged at 1.2%. Inflation excluding energy and food edged down to 2.4% in July, with goods inflation increasing from 0.9% to 1.2% and services inflation falling from 3.3% to 3.0%. Most measures of underlying inflation were broadly stable in July. Wages do not show a material response to the energy shock at this stage. Compensation per employee grew at an annual rate of 3.3% in the second quarter, down from 3.5% in the first quarter. Rising labor productivity has also helped contain growth in unit labor costs, which slowed to 2.6% from 3.5% in the first quarter. At the same time, growth in unit profits rose from 0.3% to 2.2%. Looking ahead, the ECB's wage tracker points to a modest uptick to 2.7% in negotiated wage growth in the first half of 2027.

Inflation expectations over shorter horizons remain at elevated levels, but most measures of longer-term inflation expectations stand at around 2%, supporting the stabilization of inflation around target in the medium term. The conflict in the Middle East and recent developments in Russia's unjustified war against Ukraine have pushed the path of energy prices up further. This is likely to keep headline inflation well above target into the first half of 2027. Thereafter, energy inflation should decline and turn negative up to mid-2028, bringing headline inflation down. Higher energy prices are expected to feed through gradually to core and food price inflation. The improved economic outlook should also contribute to slightly higher core inflation, which is expected to keep rising until early 2027 and stay elevated for the rest of the year before moderating in 2028. Overall headline inflation is expected to return to around target towards the end of 2027, supported by the effects of higher interest rates. We will continue to monitor closely the size and persistence of the energy price increase and how it feeds through to price and wage setting, inflation expectations, and overall economic dynamics.

Turning now to the risk assessment, the risks to the growth outlook are to the downside. This is due in particular to the Middle East conflict and developments in Russia's unjustified war against Ukraine. Renewed disruption of energy supplies could cause energy prices to rise further and for longer than currently expected. This would weigh on real incomes, spending, and investment. A worsening of global financial market sentiment or spillovers in global bond markets could tighten credit conditions and thereby dampen demand. A resurgence of trade tensions between major economies could also further disrupt supply chains, reduce exports, and weaken consumption and investment. By contrast, growth could turn out to be higher if the economy and energy markets were to adapt more quickly than expected to the disruption caused by the ongoing conflicts, or if these were resolved sustainably. Moreover, the adoption of new technologies by euro area firms and spending on defense and infrastructure, as well as reforms to enhance productivity and complete the EU's single market, may drive up growth by more than expected.

The risks to the inflation outlook are to the upside. This is due in particular to the Middle East conflict and developments in Russia's unjustified war against Ukraine. The energy shock could intensify further, and its effects on other prices and wages could be stronger than currently expected. Gas prices in particular could increase in the event of further supply disruptions or an unusually cold winter coinciding with low storage levels. The longer energy prices stay high, the more likely they are to drive up broader inflation through indirect and second-round effects. Renewed trade tensions could give rise to more fragmented global supply chains, curtail the supply of critical raw materials, and worsen capacity constraints in the euro area economy. Extreme weather events, potentially reinforced by intensifying El Niño conditions, and the unfolding climate and nature crisis more broadly could drive up food prices by more than expected. By contrast, inflation could turn out to be lower if ongoing geopolitical conflicts were resolved sustainably or if indirect or second-round effects from the recent energy price shock proved less pronounced than anticipated. More volatile and risk-averse financial markets could weigh on demand and thereby lower inflation as well.

Market interest rates have increased since our previous meeting, reflecting similar moves in global markets. Following our interest rate increase in June, bank lending rates for firms have risen to stand at 3.8% in June and July from 3.6% in May. The cost of market-based corporate debt stood at 4% in July, which was similar to previous months and well above its level before the conflict in the Middle East. The annual growth rate of bank lending to firms, which usually responds to changes in monetary policy with a longer delay, increased further to 4.4% in July from 4% in May and June. The annual growth rate of corporate bond issuance was 3.4% after 3.6% in June and 3.3% in May. Mortgage rates were unchanged in June and July at 3.5%, while mortgage lending growth softened to 3% in July from 3.1% in May and June.

So in conclusion, the Governing Council today decided to raise the three key ECB interest rates by 25 basis points. We are committed to setting monetary policy to ensure that inflation stabilizes at our 2% target in the medium term. We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. 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. In any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation stabilizes sustainably at our medium-term target and to preserve the smooth functioning of monetary policy transmission. And we are now ready to take your questions. Thank you.

Thank you for your excellent questions. So you give me a chance to yet again give what I like most, which is framework guidance. And that framework guidance is really encapsulated in the three key pillars that we use, which is the inflation outlook with the assessment of the risk, it is the underlying inflation, and it is the transmission. Those are the three pillars. And of course, we do that on the basis of the analysis of the shock—in the present circumstances predominantly a supply shock—of which we analyze the intensity, the duration, and the propagation. We do that on a meeting-by-meeting basis and we are data dependent. You've heard me say that probably ad nauseam to your taste, but this is what we stick to and this is how we operate. Now markets do what they have to do and we do what we have to do, which is to provide price stability, which has been defined, as you know, as the 2% target in the medium term. When I talk about framework guidance, this is what I'm talking about. And I'm assuming that markets find it helpful in order to determine the path that they understand. But they do their job, we do our job. And I can assure you that the entire discussions that we had today were focused on today's decision. So we are not and we have not actually debated at all any kind of future path, likelihood of this or likelihood of that, because we are dead serious about the framework that we observe and that we want to collectively respect. I will say this: when there is something to report about me personally, you'll be the first one to know after my grandchildren, and there is nothing to report.

I know, and you might try multiple angles to get me to identify what is the next move, but this is really not the point. And I can assure you that we are not taking a view as to which direction we go at our next meeting. And why is that? And I'll come back to the neutral rate for a second. Why it is, because... You have a second question, why don't you give it to me at the same time? Because then it's fair for the others, because they have to put their questions at the same time. So tell me.

Okay, so I go back to the answer I was giving you for your first question. We don't focus on the meeting and on the data to annoy either you or the observers or the analysts. We do it because we are in this uncertainty that can change things almost overnight. I'll give you an example: the refining margins. If I had talked to you about the refining margin six months ago, we wouldn't have known what we are really talking about. Now, whether you call it the crack spread or the refining margin on liquid fuel, now we all know what it's about, and we'll all know that diesel is used by a category of economic actors, and we know now that it's yet another bottleneck. But those things happen as a result of multiple geopolitical changes, as a result of supply chain reorganizations, as a result of adjustment of the economy. And because we have that level of uncertainty, we simply cannot anticipate what exactly will be the next move. Now you could argue that in the present state, and assuming that nothing changes, we should be doing this and that, but this is not how we are trying to address the issue of price stability. We are focusing on what the data delivered today, and we are ready to demonstrate the appropriate agility in whichever direction it is needed. So I hope I'm clear on that. Second point that you raised is this issue of the upper end of the neutral rate band. This neutral rate band is work in progress on a constant basis, right? It is produced by staff, as you know, and they have delivered a band that they consider as the neutral rate band. But this is highly conceptual because you cannot actually pinpoint the neutral rate, because it's a factor of multiple variables that change over time and because it is supposed to be defined in times of no shock, and we are constantly under shocks. So we are not attaching a great importance in the current circumstances to the neutral rate. And your second question, because I don't want to leave you frustrated because I did not address your question: you say that our projections are not at target. So the decision that we took today, which was by the way a unanimous decision, was a no-brainer, right? What we will have to do in the future will be determined at each and every meeting. But what I can tell you, and this is in the monetary policy statement, is that we are determined to deliver on our target. Voilà.

Thank you very much for your questions. On the bond yield: it's a phenomenon, as we indicated clearly in the monetary policy statement, which is taking place across global markets. It's not a euro-specific issue. It's happening across the world, and it's having multiple causes. I would mention as the obvious one, supply and demand, when you have significant financing needs arising out of, for instance—I will not say hyperscalers because I think that is narrowing the economic sector that is concerned—but any AI-related activity at the moment is a potential consumer of financing. In whatever form it takes—exit used to be restricted to equity, it's moving now clearly in the bond and in the private credit area as well. So that's, I think, a key driver of what we're seeing. And then there are fundamentals having to do with each and every economy. And I would venture that the US market, which is so large and so liquid and such a driver, is also playing a role. So having said all that, it's incorporated in our projections, taken into account, and obviously we are monitoring attentively what is happening on the markets and particularly the long end of the curve.

On inflation: thank you for asking that question because it gives me a chance to explain really what we discussed over the meeting and how we see things. We have been in a way surprised at both ends, and that's the reason why we have revised up with our projection for growth as well as for inflation, although different timing. We have been surprised by the resilience of our economy, and we had anticipated in previous projections that growth will be lower than what we are seeing and of what we are projecting. So we moved from 0.8% to 0.9%. If you factor into that numbers that have been released post cut-off date, it's actually more than 0.9% because Q2 was 0.6%, came up as an upward surprise. And if you factor that number into the projection—it's not a projection because the cut-off date was earlier, but if you were to revise it, it's more than 0.9%. So we've been surprised in a way for good because growth is stronger than we had anticipated. The economy is adjusting better. And we've also been surprised on the inflation front because we have seen inflation in a way lower than we had anticipated. This is particularly the case for food. But we believe that inflation will be longer-lasting than we had anticipated. So you have these two phenomena: more resilience, better adjustment of the economy, lower inflation, but longer-lasting. So we are adjusting our projections on that basis.

Okay. Well, thank you for putting the spotlight on the digital euro because, as you know, it's a topic and a project that I attached great importance to ever since the day I joined almost seven years ago, and it was then endorsed by Fabio Panetta and then now Piero Cipollone with great talent and great energy, as well as many of our staff as well. So there are multiple reasons why this digital euro is important. One is, as we move into a world of digital payments, including by private sector actors, we think that it's important that central bank money also had a digital shape and form. That's number one. Number two has to do with sovereignty and it has to do with not sovereign autonomy, but our capacity to keep control of our currency and keep control of the guardrails on which digital payments circulate, because, as you know, payment infrastructure is part of our sovereignty, and he who does not control payment infrastructure is potentially vulnerable. I'll say no more on that front, but I think I've answered your first question.

I'm very hopeful, and it's included in the monetary policy statement, that as early as possible and certainly before year-end, the piece of legislation that is in discussion at the moment in trilogue will actually be voted upon. I look forward to it. I encourage members of parliament to look at it and to negotiate as fast as they can. There are a series of topics under discussion at the moment: the allocation of fees, the cap—all that is highly technical and quite sensitive, but I really hope that this is going to be completed in short order so that we can then launch the test phase as quickly as possible. We're all working hard on that now.