ECB President Lagarde (post-meeting statement) reiterates inflation risks to the upside, growth risks to the downside

GUIDANCE: Will set monpol to ensure inflation returns to target in the medium-term Reiterates data dependency Inflation outlook and risks will be key to setting rates Not pre-committing to a rate path Committed to setting policy to ensure inflation settles at target in the medium-term Stands ready to adjust all instruments within its mandate to achieve policy goals INFLATION: Outlook for energy prices, while volatile, are close to June projections Uncertainty remains high Full impact of energy shock waiting to play out Inflation eased in June Wage surveys indicate moderate wage growth; higher energy prices might weigh on real incomes, spending and investments Energy shock is feeding into higher prices; firms expect to raise selling prices Reiterates that most measures of longer-term inflation expectations stand at around 2% Energy inflation will keep inflation well above target into H1 2027, will decline afterwards Reiterates that inflation risks are to the upside ECONOMY: Recent inflation points to some activity improvement in Q2 Services activity has partly recovered, surveys suggest Digital services have been robust Manufacturing has continued to hold up Sees modest growth in the near-term Drivers of medium-term growth remain intact Reiterates fiscal responses to energy shock should be temporary, targetted and tailored Extreme weather events could drive up food prices by more than expected Reiterates that risks to the growth outlook are to the downside FINANCIAL CONDITIONS: Financial conditions have become slightly tighter since last meeting Credit standards for mortgages tightened in Q2 OUTLOOK Conflict is a major source of uncertainty Growth could turn higher if economy adapts more quickly than expected, or if the conflict was resolved sustainably