in the euro area, specifically at 7. 4 % in october 2023. headline inflation is expected to stabilize, reaching 2. 1 % on average by 2025. however, a key concern remains with services inflation, which, due to the staggered nature of wage agreements, is expected to moderate more gradually than headline inflation in the projections. a crucial aspect of the ecb monetary policy against inflation lies in maintaining wellanchored inflation expectations, even in the face of significant inflation rates. this achievement, underscores the confidence of the markets and the public in the ecb's commitment and capability to maintain price stability. the anchoring of these expectations has been a cornerstone in preventing a self - fulfilling spiral of rising prices and wages, thereby contributing to the overall economic stability of the euro area. the ecb's actions have not only been effective in steering towards the price stability objective, during these turbulent times, but have also enhanced the credibility of our policy interventions. this credibility is fundamental in ensuring the continued effectiveness of our monetary policies and in maintaining the confidence of the markets and the public. as regards the future, the current energy crisis has highlighted the importance of one of our key challenges, namely the need to speed up the green transition. to safeguard the long - term benefits of such a transition, policy makers need to be ready to address effectively any possible difficulties that may arise during the process. 2 / 3 bis - central bankers'speeches according to the european commission's impact assessment ( 2022 ), transition towards net zero emissions is expected to have a limited impact on aggregate output, but its composition will shift from consumption towards investment. this is because the green transition will require higher investments relative to historical averages at least for a few years, which will shift the relative dynamics of domestic demand towards investment. further to this, it should also be expected that shifting consumption patterns towards net zero emissions may entail significant costs such as switching to electric or hydrogen vehicles and the energy needed to power them, thus increasing the prices of such goods while affecting negatively the purchasing power of consumers and reducing consumption in real terms. the worst - case scenario, according to the same study, suggests aggregate gdp by 2030 to be 0. 4 % below the baseline, with the negative impact on gdp being explained by a decrease in private consumption as well as by a decrease in net exports as a consequence of the respective increase of prices of both input and final goods. on the other hand, the best - case

##ilience of domestic demand dynamics. in the subsequent years, employment growth outpaced gdp growth, which, while positive in terms of job creation, signalled worrying trends in productivity. this may be attributed to several factors : such as the rebound in labour - intensive services, labour hoarding that is the decision of companies to keep staff employed as economies 1 / 3 bis - central bankers'speeches reopened even if they were not fully utilised combined with robust company profits that allowed firms to retain staff. as of 2023, the euro area labour market's resilience appears to be changing. there are signs of a slow - down in job creation, particularly in the services sector. business employment expectations are softening and vacancy rates are moderating. notably, the slight increase in the unemployment rate in the euro area to 6. 5 % in october 2023, could be a further sign of the transition in economic dynamics. at the same time, wage growth remains strong, even though there are early signs of moderation, which could be fundamental in relieving inflationary pressures. the short and medium term economic outlook is positive in the sense that our downside case scenarios have not materialised. the euro area's economic forecast points to a moderation in growth, but avoidance of a hard landing. the projections for 2023 predict a gdp growth of 0. 7 %, gradually increasing to 1. 5 % by 2025. similarly in cyprus, we see the same trends but at relatively higher levels of economic growth. specifically, growth is expected to reach 2. 4 % in 2023, rising further to 2. 7 % in 2024, and 3. 1 % in 2025. the forecast for the euro area considers several factors such as the strength of the labour market, even though it is moderating ; the challenging external environment ; the impact of ongoing monetary policy tightening ; and the gradual withdrawal of fiscal policy support. regarding price developments, inflation dynamics are on a strong corrective path. recent months have witnessed a substantial turnaround in the inflation landscape of the euro area, with inflation dropping to 2. 9 % in october 2023, from the historical high of 10. 6 % in october 2022. this correction in inflation indicates that the ecb governing council's monetary policy efforts are bearing fruit. the projections indicate a continued disinflationary process, with energy inflation in negative territory and a moderation in food inflation, which is still at a high level