Christine Lagarde, President of the European Central Bank (ECB), and Vice-President Luis de Guindos addressed a press conference in Ljubljana on October 17, 2024. They announced the Governing Council's decision to lower the three key ECB interest rates by 25 basis points. The move aims to address inflation dynamics and strengthen monetary policy transmission.
"The incoming information on inflation shows that the disinflationary process is well on track," said Lagarde. However, she noted that "financing conditions remain restrictive." Inflation is projected to rise in the coming months before declining to target next year.
The ECB remains committed to ensuring inflation returns to its two percent medium-term target. "We will keep policy rates sufficiently restrictive for as long as necessary," Lagarde emphasized. She also highlighted a data-dependent approach for future rate decisions without pre-committing to any specific path.
Economic activity has been weaker than expected, with industrial production volatility and contracting manufacturing sectors. Although there was an uptick in services during August due to tourism, recent data indicates sluggish growth overall. Household consumption fell despite rising incomes in the second quarter.
The labor market showed resilience with an unemployment rate of 6.4 percent in August but faced slowing employment growth and moderated labor demand.
Lagarde stressed that fiscal and structural policies should aim at enhancing productivity and competitiveness while reducing price pressures over time. Implementing proposals from Mario Draghi and Enrico Letta could help achieve these goals.
Inflation fell further to 1.7 percent in September, driven by sharp declines in energy prices at -6.1 percent annually. However, food price inflation increased slightly, while goods inflation remained subdued.
Risks to economic growth are tilted downward due to geopolitical tensions like Russia's war against Ukraine and conflicts in the Middle East potentially disrupting trade and energy supplies.
Credit standards for business loans were unchanged after progressive tightening over two years; however, mortgage credit standards eased due to competition among banks leading to increased demand for mortgages.