President Lagarde presents the latest monetary policy decisions – 23 July 2026

**SPEAKER_1** (0:01)
Today, the European Central Bank's Governing Council took its latest monetary policy decisions. In this episode, you hear President Christine Lagarde deliver the monetary policy statement from the press conference where she explains the decisions.
You're listening to Euro Matters, the European Central Bank Podcast.
Today is Thursday, the 23rd of July, 2026, and here is the monetary policy statement.

**Christine Lagarde** (0:29)
The Vice President and I welcome you to our press conference. The Governing Council today decided to keep the three key ECB interest rates unchanged. The outlook for energy prices, while highly volatile, currently stand close to the baseline of the June Euro system staff projections, and well above the levels recorded prior to the conflict in the Middle East. Uncertainty remains high, and the full inflationary impact of the energy shock has yet to play out. We are therefore closely monitoring the intensity and duration of the shock, as well as its indirect and second round effects. We are committed to setting monetary policy to ensure that inflation stabilizes at our 2% target in the medium term. 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 we'll then explain our assessment of financial and monetary conditions.
Looking at the economic activity, recent inflation points to some improvement in economic activity in the second quarter, even though the conflict in the Middle East remained a headwind. Surveys suggest that activity in the services sector has partly recovered after weakening marketly in the immediate aftermath of the energy shock. Digital services have been robust, in part owing to the increasing contribution from AI-related activity. Manufacturing has continued to hold up, supported by firms building up stocks to guard against supply chain risks, as well as by higher defense spending. Unemployment stood at 6.2% in May. At the same time, job postings have continued to decline, and both firms and households expect the labor market to remain weaker than before the conflict. Forward looking indicators suggest that economic growth will remain modest in the near term, weighed down by the energy shock and related uncertainties. Yet the fundamental drivers of medium-term growth remain intact. Private consumption, investment in new digital technologies, government spending on defense and infrastructure, and some recovery in exports should all contribute to overall growth momentum. The Governing Council reiterates its call for urgent action to strengthen the Euro area economy while maintaining 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. Fiscal responses to the energy shock should be temporary, targeted and tailored. The positive vote in the European Parliament earlier this month was a significant milestone on the path to establishing the digital euro. We welcome the shared objective of the Parliament, the European Union Council and the Commission of reaching agreement by the end of this year on the single currency package. The digital euro will complement physical cash with its digital equivalent, providing a means of payment for any digital transaction throughout the euro area.
Let me now turn to inflation. So inflation declined to 2.8% in June from 3.2% in May. Energy price inflation declined to 8.5% after 10.8% in May, while food price inflation fell from 1.9% to 1.5%.
Inflation excluding energy and food eased to 2.4% from 2.6% in May, with goods inflation decreasing from 0.9% to 0.7% and services inflation from 3.5% to 3.2%.
The energy shock continues to feed into higher prices. It is becoming more expensive for firms to source inputs and they therefore expect to put up their selling prices. While developments in underlying inflation have remained contained, the full effect of the energy shock have yet to play out. The ECB's wage tracker and surveys on wage expectations continue to indicate moderate wage growth over the coming quarters. Rising labor productivity has also helped contain growth in unit labor costs. Inflation expectations over shorter horizons remain at elevated levels. Most measures of longer term inflation expectations stand at around 2%, supporting the stabilization of inflation around target in the medium term.
While energy price inflation declined in June, its rise since the start of the conflict and its impact on food, goods and services price inflation is likely to keep inflation well above target into the first half of 2027 Inflation should then decline as energy prices are expected to fall and other prices should rise more slowly. However, the conflict remains a major source of uncertainty. We are therefore closely monitoring the size and persistence of the energy price increase and how it feeds through to price and wage setting, inflation expectations, and the overall economic dynamics.