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

saw inflation halve again to 2. 6 % in june when we started lowering interest rates. the new data available at the time of the september governing council meeting reinforced our confidence in the timely return of inflation to our 2 % target. we therefore lowered the rate on the deposit facility, which is the rate through which we steer the monetary policy stance, by another 25 basis points to 3. 5 %. we are determined to ensure that inflation returns to our 2 % medium - term target in a timely manner. we will continue to follow a data - dependent approach to determining the 2 / 5 bis - central bankers'speeches appropriate level and duration of restriction, focusing on the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. policy rates will be kept sufficiently restrictive for as long as necessary to achieve our aim. we are not pre - committing to a particular rate path. moreover, as we announced on 13 march 2024, some changes to the operational framework for implementing monetary policy took effect from 18 september. 1 in particular, the spread between the interest rate on the main refinancing operations and the deposit facility rate was set at 15 basis points. the aim is to steer short - term money market rates more closely in line with monetary policy decisions. in parallel to our policy deliberations, we have also launched an assessment of our monetary policy strategy. this assessment will be more limited in scope than our last review, which we completed in july 2021, and will include two work streams. one work stream will focus on the changed inflation environment and the other on the implications for our monetary policy strategy, including what we can learn from the periods of both low and high inflation. we expect to conclude the assessment in the second half of 2025 and i intend to keep you informed in our regular hearings and interactions. advancing capital markets union let me now turn to the second topic of this hearing – the capital markets union. the ecb has long emphasised the need for progress in this area to integrate our fragmented markets and thus foster risk diversification and shock absorption across the eu. doing so would support financial stability and facilitate the transmission of monetary policy. but a deep and integrated single market for capital is also essential for achieving some of the eu's other key goals, from financing the green and digital transitions to enabling savers to earn higher returns. additionally, young and innovative firms need to grow and become more productive, which will ultimately benefit all europeans. for the time being