I will switch to English to tell you that it is a great pleasure to be back with you and to continue the regular exchanges that we are getting accustomed to. This year, as you've indicated, has been a year of profound global economic and geopolitical uncertainty. As we navigate a world increasingly marked by fragmentation, uncertainty and conflict, Europe must reaffirm its role as a pillar of economic and political stability. And with the foundations of global balance and strain, the international financial system is also entering uncharted territory. A key part of this evolving landscape is the rapid rise of crypto assets and stable coins. For this hearing, you asked me to elaborate on the emerging challenges and opportunities associated with this new digital development. But before I do that, I would like to update you briefly on the ECB's assessment of the Euro area economy and our monetary policy stance.
So, Euro system staff expect the Euro area economy to grow by 0.9% this year, 1.1% in 2026 and 1.3% in 2027. You must have received, and I don't know if it is tabled or if you've received it separately, two pages that I have committed to always deliver to you so that you can consider some of the charts that we use. And you have in the left hand corner up there the indication concerning the growth of GDP. In the first quarter of this year, manufacturing strengthened and the services sector grew moderately. At the same time, the labor market remained robust with the unemployment rate at 6.2% in April, which is the lowest number since the launch of the euro. Survey data point overall to some weaker prospects for economic activity in the near term. Higher tariffs and a stronger euro are expected to dampen exports with high uncertainty delaying investment decisions. But there are several factors that are keeping the economy resilient and that should support growth over the medium term. The strong labor market, rising real incomes, robust private sector balance sheets and easier financing conditions, partly due to our recent interest rate cuts that you have reminded us of. All of that should help consumers and firms withstand the fallout from a volatile global environment. Defense and infrastructure spending investment should also bolster growth.
Risks to growth outlook remain tilted to the downside. In particular, growth could slow in the event of a further escalation in global trade tensions and the associated uncertainties, deteriorating financial market sentiment and continued geopolitical tensions. Having said that, a swift resolution to trade and geopolitical tensions or a further increase in defense and infrastructure spending could spur activity by more than is expected currently. The global economic outlook continues to face exceptionally high economic and political uncertainty. But as I said recently in a piece that you mentioned in the Financial Times, moments of change can also be moments of opportunity. Support for the euro area has reached an all-time high. I strongly recommend that you look at this bottom left. Support for the euro is 83%. It's never been so high since the euro was launched. Now is the time to make the Euro area economy more productive, more competitive, more resilient. We all need to see targeted fiscal and structural policies and strategic investments. The proposals in the competitiveness compass should be adopted swiftly. The savings and investment union must be completed and a legislative framework to pave the way for the potential introduction of a digital euro should be put in place rapidly, please. By making the right policy choices, we can leverage the current momentum to boost the economic perspectives for Europe and for its citizens.
Inflation is currently at around our 2% medium-term target. Headline inflation decreased from 2.2% in April to 1.9% in May, reflecting a strong decline in services inflation after a temporary jump in travel related services prices in April as a result of Easter. Core inflation, excluding energy and food, also declined from 2.7% in April to 2.3% in May. Most indicators of underlying inflation continue to suggest that inflation will stabilize sustainably at our 2% medium-term target. Nominal wage growth continues to moderate and stood at 3.8% in the first quarter of this year, down from 4.1% in the fourth quarter of 2024. It should continue to follow its downward path as pressure to recoup past real wage losses fades. The Euro system staff projections see inflation staying temporarily below 2% in 2026, driven in part by a stronger euro and a decline in energy commodity prices, before returning to target in 2027. Headline inflation is expected to average 2% in 2025, 1.6% in 2026 and 2% in 2027. The outlook for Euro area inflation is more uncertain than usual with frictions in global trade responsible for both upside and downside risks. Upside risks include a possible fragmentation of global supply chains, while downside risks include lower demand for Euro area exports and countries with overcapacity routing their exports to the Euro area.
With inflation set to stabilize around our 2% target on a sustained basis, earlier this month the Governing Council decided to lower the key interest rates again by 25 basis points. At the current interest rate levels, we believe that we are in a good position to navigate the uncertain circumstances, especially in the current conditions of exceptional uncertainty. 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 the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. We are not indeed pre-committing to a particular rate path. So let me now turn to the second topic which is new forms of digital assets including stable coins and other crypto assets.
Crypto assets have become a fast developing segment of the financial landscape. Unbacked crypto assets, those that are not backed by a physical or a financial asset, have seen their market capitalization surge from less than 200 billion in early 2020 to around 2.7 trillion this year. This remarkable growth has been marked by investor speculation and extreme price volatility. You have a good example of that on the back of the page, the two-page document which is called topic two where you have clear indication of both crypto asset market capitalization and values. These characteristics render such assets unsuitable as a reliable means of exchange and expose investors to significant risks. For now, risks to the Euro area's financial stability from crypto assets appear limited, but the rapid pace of developments combined with data gaps that may create blind spots require closer monitoring. Survey data from selected Euro area countries suggests that around 10% of households hold crypto assets with around 14% expressing an interest in future purchases. As holdings and valuations of crypto assets rise, the risk for investors from sharp price corrections increases and could reverberate across the financial system.
As unbacked crypto assets have risen in capitalization, so have stable coins. This specific type of crypto asset aims to maintain a fixed value relative to one or more referenced assets. Currently, 99% of stable coins are denominated in US dollars. Stable coins often act as an entry point to crypto assets and facilitate crypto asset trading. They also attract users by promising faster and cheaper corporate and retail cross-border payments. At the same time though, stable coins are privately issued and notably pose risks to monetary policy and financial stability. These assets are not always able to maintain their fixed value, compromising their usefulness as a means of payment and a store of value. Moreover, a potential shift in deposits used for payments and savings from banks to stable coins could adversely affect the transmission of monetary policy through banks. Stable coins must therefore be governed by sound rules, especially when they operate across international borders.
The European Union has taken a decisive step in this direction. The Markets in Crypto Assets regulation, also known as MiCA, is the world's first regulatory framework for stable coins. It allows EU-based stable coin investors to redeem their holdings at par value at all times and requires a substantial share of stable coin reserves to be held in bank deposits, as a result minimizing the risk for consumers and financial stability. However, major jurisdictions including the United States are still working towards establishing their own regulatory frameworks. By way of examples, Tether, the largest stable coin issuer, is currently based in El Salvador, which lacks any credible frameworks for stable coins. This fragmented approach prevents a global level playing field and can open the door to new risks and systemic vulnerabilities. We must therefore remain alert to developments in other jurisdictions and advocate for globally aligned regulations for stable coins.
In this context, accelerating progress towards a digital euro is a strategic priority. Beyond addressing some of the risks posed by stable coins, a digital euro would help safeguard Europe's bank-based financial and monetary system. Not only would it strengthen Europe's strategic autonomy, but it would also ensure an innovative and resilient European retail payment system. So if we want to foster innovation and build resilience, deeper European integration, particularly in financial markets and payments, is not merely a political aspiration but a strategic necessity. As the French writer Émile Cioran wisely observed, there is something more powerful than strength, more powerful than courage, more powerful than genius itself. It is the idea whose time has come. And I would contend that Europe might very well be that idea and that it's time to fully embrace it not only as a concept but in all its manifestation. And that is what the citizens of Europe have entrusted us to do. Thank you very much.
