banking sector, is expected to amount to €55 billion in 2024. in the national arena, the recently approved legislation on the recovery and resolution of credit institutions and investment services firms distinguishes between pre - emptive resolution functions, which correspond to the banco de espana in the case of credit institutions and to the national securities market commission ( cnmv ) in that of investment services firms, and enforcement resolution functions, attributable to the fund for the orderly restructuring of the banking sector ( frob ), which sits moreover on the srm board, with the banco de espana having observer status. performance of credit institutions in 2014 before concluding, i shall review the recent performance of spanish credit institutions. the year 2014 saw an improvement in financial conditions and a recovery in activity and employment. lending to the resident private sector in spain continued to shrink in 2014, in line with the need for the deleveraging of the spanish economy ; that said, the rate of decline of lending eased ( from 8. 3 % in 2013 to 6. 4 % in 2014 ). at firms not engaging in construction and real estate activities, credit fell much less, shifting from a negative rate of 9 % in 2013 to a still - negative rate of 1. 5 % in 2014. the figures available for 2015 suggest that the year will conclude with credit running at a rate of change very close to zero or in positive territory for the first time since 2009. one key aspect in 2014 was the fact that non - performing loans ( npls ) to the resident private sector fell both in absolute terms ( by more than €24 billion ) and in terms of the npl ratio, which declined by almost 1 pp to 12. 9 %. in 2015 to date, this trend is holding, as npls have fallen to 12. 3 %. resident private - sector refinanced exposures have fallen by 4. 5 % and account for 14 % of the total, a proportion still highly influenced by forborne exposures to real estate development and construction companies. it is also worth pointing out that households and non - financial corporations are changing the composition of their savings in response to the very low interest rate environment, meaning that bank deposits have declined while units in investment funds have increased significantly. bis central bankers ’ speeches spanish banks ’ attributed profits in 2014 increased by close to 34 %, continuing the recovery initiated in 2013. despite the backdrop of declining credit and low interest rates, net interest income rose by almost 5 % owing to

that the recovery is facing headwinds. we expect the recovery to strengthen over time, as rising real incomes should allow households to consume more. the latest ecb staff projections foresee the economy growing by 0. 8 % in 2024, 1. 3 % in 2025 and 1. 5 % in 2026. the labour market remains resilient, with the unemployment rate standing at 6. 4 % in july – broadly unchanged over the past year. at the same time, employment growth slowed to just 0. 2 % in the second quarter, and recent indicators point to a further deceleration in the coming quarters. according to ecb staff, the unemployment rate is projected to remain around its current low level. turning to price developments, disinflation has been accelerating over the last two months. headline inflation fell to 2. 2 % in august 2024 and is expected to drop further in september, mainly on account of falling energy costs. core inflation – excluding energy and food – edged down to 2. 8 % in august driven by a decline in goods inflation that outweighed an increase in services inflation. the indicator of domestic inflation, which only includes items with a low import intensity, remained high in august as wages continued to grow at an elevated pace. at the same time, the overall growth in labour costs has been moderating in recent quarters, and profits have been buffering the impact of higher wages on inflation. looking ahead, inflation might temporarily increase in the fourth quarter of this year as previous sharp falls in energy prices drop out of the annual rates, but the latest developments strengthen our confidence that inflation will return to target in a timely manner. we will take that into account in our next monetary policy meeting in october. the ecb staff projections from september foresee inflation to average 2. 5 % in 2024, 2. 2 % in 2025 and 1. 9 % in 2026. the ecb's monetary policy stance let me now turn to our monetary policy stance – the first topic chosen for today's hearing. we have come a long way in the fight against inflation. in october 2022 inflation peaked at 10. 6 %. by september 2023, the last time we raised interest rates, it had dropped by more than half, to 5. 2 %. the decline in inflation and the anchoring of longer - term inflation expectations showed that our strong response was bearing fruit. then, after nine months of holding rates steady, we