ECB President Lagarde (post-meeting statement) reiterates that outlook remains uncertain with upside risks to inflation and downside risks to growth

GUIDANCE: Reiterates meeting-by-meeting approach; not pre-committing to a rate path Stands ready to adjust all instruments OUTLOOK: Outlook remains uncertain with upside risks to inflation and downside risks to growth Domestic demand seen weaker now than in March Risks to growth outlook are to the downside Growth could turn out to be higher if economy adapts more quickly, or the war is resolved promptly Risks to inflation outlook are to the upside Bigger spillover to other prices is among upside risks Inflation could be somewhat lower if war effects prove to be more short-lived than currently seen, and secondary impact is lower than seen ECONOMY: Conflict is weighing on activity Manufacturing has held up Surveys point to a slowdown in services Household balance sheets are solid INFLATION: War in the Middle East raising inflation pressure Higher energy costs and lower confidence will hit investment in the short-term Some indicators of underlying inflation have been driven higher by energy shock Short-term inflation expectations higher than when the war began; long-term expectation stand around 2% Increase in energy prices will lift inflation further, above 2% in H1 2027 LABOUR MARKET: Labour market remains resilient Labour demand has cooled further Wage trackers continue to indicate easing labour costs in 2026 FISCAL: Public investments are seen providing some cushion Reiterates spending should be targetted, temporary FINANCIAL/MONETARY CONDITIONS: Financial conditions are broadly unchanged, but tighter than before the war Euro area banks are resilient A sharp drop in asset prices, and deteriorating asset quality, could cause risks to financial stability