in 2023 and then return to around 2 per cent in 2024. the latest forecasts from the leading international institutions and private analysts, as well as those inferred from the prices of financial assets indexed to consumer prices, confirm that long - term expectations remain broadly in line with the european central bank ’ s ( ecb ) definition of monetary stability. nevertheless, in the current environment of high inflation, a gradual normalization of monetary policy, which had been calibrated to contain deflationary and recessionary pressures during the most serious phase of the pandemic crisis, is needed. the risk that, in the long run, exceptionally high price increases will eventually impact expectations or trigger a price - wage spiral should be countered, although wage growth, despite having strengthened, remains moderate for the time being. the ecb governing council therefore decided to end its net asset purchases from the end of last week. in addition, it announced its intention to raise the key interest rates by 25 basis points at the meeting on 21 july ; an even larger increase could be appropriate in september if the medium - term inflation outlook does not improve. the pace of the subsequent gradual but sustained process of interest rate increases will depend on the new economic and financial data and on how they will affect the prospects for prices. partly because of the unjustified perception of a particularly aggressive monetary policy stance, the first half of june was characterized by a sharp upward revision of expectations for key interest rate rises and by an abrupt increase in long - term interest rates, which play a key role in the economic activity of firms and households. tensions have overwhelmed the markets for public and private bonds and spread to the equity market. the considerable widening of yield spreads between the government bonds of euro - area countries perceived as being more vulnerable and german bonds points to growing risks of market fragmentation along national borders. given these trends, at an extraordinary meeting on 15 june, the governing council decided that reinvestments under the pandemic emergency purchase programme ( pepp ) would be conducted flexibly, and announced the acceleration of work to create a new tool designed to counter fragmentation. these measures aim to ensure as homogeneous a transmission of monetary policy as possible across euro - area countries, ensuring the smooth normalization needed to bring inflation back into line with the price stability objective. the announcement of the council ’ s decisions contributed to a sudden and significant reduction in public bond spreads ; the peak of around 250 basis points reached in the spread between italian and german

christine lagarde : ecb press conference - introductory statement introductory statement by ms christine lagarde, president of the european central bank, and mr luis de guindos, vice - president of the european central bank, frankfurt am main, 22 july 2021. * * * good afternoon, the vice - president and i welcome you to our press conference. at today ’ s meeting, the governing council focused on two main topics : first, the implications of our strategy review for our forward guidance on the key ecb interest rates ; and, second, our assessment of the economy and our pandemic measures. in our recent strategy review, we agreed a symmetric inflation target of two per cent over the medium term. our policy rates have been close to their lower bound for some time and the medium - term outlook for inflation is still well below our target. in these conditions, the governing council today revised its forward guidance on interest rates. we did so to underline our commitment to maintain a persistently accommodative monetary policy stance to meet our inflation target. in support of our symmetric two per cent inflation target and in line with our monetary policy strategy, the governing council expects the key ecb interest rates to remain at their present or lower levels until we see inflation reaching two per cent well ahead of the end of our projection horizon and durably for the rest of the projection horizon, and we judge that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. this may also imply a transitory period in which inflation is moderately above target. let me turn to the assessment of the economic outlook and our pandemic measures. the recovery in the euro area economy is on track. more and more people are getting vaccinated, and lockdown restrictions have been eased in most euro area countries. but the pandemic continues to cast a shadow, especially as the delta variant constitutes a growing source of uncertainty. inflation has picked up, although this increase is expected to be mostly temporary. the outlook for inflation over the medium term remains subdued. we need to preserve favourable financing conditions for all sectors of the economy over the pandemic period. this is essential for the current rebound to turn into a lasting expansion and to offset the negative impact of the pandemic on inflation. therefore, having confirmed our june assessment of financing conditions and the inflation outlook, we continue to expect purchases under the pandemic emergency purchase