, as not all of them will be needed to the same extent as in the past. meeting the following challenges will be crucial : • formulating and implementing medium - term - oriented macro precondition for sustained and more balanced global growth ; • intensifying efforts to undertake structural reforms ; • correctly timing and implementing exit policies so as to ensure fiscal sustainability and maintain price stability ; and policies as a • strengthening the financial system and the global financial architecture so as to safeguard financial stability. how can we ensure financial stability in the future? the most recent discussions on financial stability have focused on regulation and the role central banks should play therein. unfortunately, the change of market participants ’ behaviour is not on top of the agenda. as the crisis is the result of many failings, let me recall the various lines of defence that should be in place in order to secure financial stability. the first line of defence is that market participants must be liable for their actions. they have to bear in mind the long - term risk that their actions might impose on financial institutions, and on the financial system as a whole. economic and financial incentives have to be aligned with this simple principle. as yet, i have, however, not seen any significant change in the behaviour of market participants. the second line of defence rests on the transparency of the financial system, including its institutions, products and markets. it rests on the implementation of coherent international supervisory and regulatory standards. this requires an overhaul of supervision and regulation at both the macro and the micro - prudential level. the third line of defence rests on safeguarding liquidity conditions for markets and solvent institutions. the fourth line of defence involves governments applying clear and harmonised procedures to resolve matters when insolvencies of systemically important financial institutions occur. how is the global financial architecture changing? on the institutional side, we are seeing many encouraging developments, both globally and across europe. in fact, some far - reaching changes in the global financial architecture are unfolding. all main central banks in the world are actively involved. the heads of state or governments have decided that the g20 would now be the premier international forum for international economic cooperation. at the recent summits in washington, d. c., london and pittsburgh, five areas were identified for joint action to improve global regulation and oversight, including : • the strengthening of transparency and accountability ; • the establishment of a sound regulatory framework and, in particular, the enhancement of basel ii ; • the promotion of integrity

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