relationship lending can remain profitable in a more competitive environment. 3. increased competition in banking seems to be reducing the availability of relationship lending in the euro area before further describing the effects of increased competition on the availability of relationship lending, let me stress that the phenomena we are talking about are not directly observable, and hence making it hard to evaluate the availability of relationship lending with certainty. on the one hand, increased competition may deter banks from costly acquisition of information on borrowers if they fear that the latter can more easily switch to other banks in good times. on the other hand, the competition from non - banks in so many of banks'activities may push more banks towards relationship lending with sme, a segment on which they can not be challenged by non - banks. recent evidence seems to suggest that the availability of relationship lending is decreasing. we observe for instance that in belgium and germany, the growth rate of real loans to the private sector is lower than output growth, which is quite different from what was observed in previous episodes of economic slowdown. this decline coincides with large commercial banks reducing the scale of their retail banking because competition from local savings banks has intensified. there is also evidence that the banks which have been involved in mergers tend to limit the scale of their lending relationship activities. finally, some observers expect that the introduction of the basel ii accord would increase the capital charges on loans supplied to small and medium enterprises. this new regulation is likely to make the price of credit to small and medium enterprises more responsive to market interest rates. this would directly affect the role of banks in the monetary policy transmission ; as the recent research in the eurosystem has shown this role depends on the particular environment in which european banks have operated up to the recent past. in conclusion, recent trends in the european financial markets seem to have put pressure on banks, leading some of them to reduce the scale of their relationship lending activities. if it continues, the recent reduction in the availability of relationship lending in europe could affect the euro area business cycle and the transmission of monetary policy as the liquidity insurance provided by banks to sme decreases. all in all increased competition will trigger substantial changes and cause difficulties. but in the end after a period of transition the financial industry of the euro area will have gained competitiveness and strengthened robustness. such developments are clearly of primary importance for central bankers and this is precisely why this conference is so useful.

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, 12 september 2024. * * * good afternoon, the vice - president and i welcome you to our press conference. the governing council today decided to lower the deposit facility rate – the rate through which we steer the monetary policy stance – by 25 basis points. based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to take another step in moderating the degree of monetary policy restriction. recent inflation data have come in broadly as expected, and the latest ecb staff projections confirm the previous inflation outlook. staff see headline inflation averaging 2. 5 per cent in 2024, 2. 2 per cent in 2025 and 1. 9 per cent in 2026, as in the june projections. inflation is expected to rise again in the latter part of this year, partly because previous sharp falls in energy prices will drop out of the annual rates. inflation should then decline towards our target over the second half of next year. for core inflation, the projections for 2024 and 2025 have been revised up slightly, as services inflation has been higher than expected. at the same time, staff continue to expect a rapid decline in core inflation, from 2. 9 per cent this year to 2. 3 per cent in 2025 and 2. 0 per cent in 2026. domestic inflation remains high as wages are still rising at an elevated pace. however, labour cost pressures are moderating, and profits are partially buffering the impact of higher wages on inflation. financing conditions remain restrictive, and economic activity is still subdued, reflecting weak private consumption and investment. staff project that the economy will grow by 0. 8 per cent in 2024, rising to 1. 3 per cent in 2025 and 1. 5 per cent in 2026. this is a slight downward revision compared with the june projections, mainly owing to a weaker contribution from domestic demand over the next few quarters. we are determined to ensure that inflation returns to our two per cent medium - term target in a timely manner. we will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim. we will continue to follow a data - dependent and meetingby - meeting approach to determining the appropriate level and duration of