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, 27 july 2023. * * * good afternoon, the vice - president and i welcome you to our press conference. inflation continues to decline but is still expected to remain too high for too long. we are determined to ensure that inflation returns to our two per cent medium - term target in a timely manner. the governing council therefore today decided to raise the three key ecb interest rates by 25 basis points. the rate increase today reflects our assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission. the developments since our last meeting support our expectation that inflation will drop further over the remainder of the year but will stay above target for an extended period. while some measures show signs of easing, underlying inflation remains high overall. our past rate increases continue to be transmitted forcefully : financing conditions have tightened again and are increasingly dampening demand, which is an important factor in bringing inflation back to target. our future decisions will ensure that the key ecb interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our two per cent medium - term target. we will continue to follow a data - dependent approach to determining the appropriate level and duration of restriction. in particular, our interest rate decisions will continue to be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. we also decided to set the remuneration of minimum reserves at zero per cent. this decision will preserve the effectiveness of monetary policy by maintaining the current degree of control over the monetary policy stance and ensuring the full pass - through of our interest rate decisions to money markets. at the same time, it will improve the efficiency of monetary policy by reducing the overall amount of interest that needs to be paid on reserves in order to implement the appropriate stance. the decisions taken today are set out in a press release available on our website. the details of the change to the remuneration of minimum reserves are provided in a separate press release to be published at 15 : 45 cet. i will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions

- end, private sector means of payment will fluctuate around 9 percent. this figure is below the lower limit of the 2008 monetary program target due to a steeper - thananticipated decline in the demand for money. this came about because, when the range was established, the strength and magnitude of the adverse shocks that affected the demand for money throughout the year were unforeseeable. particularly important was the uncertainty caused by a markedly deteriorated international scenario, which led to a change in the composition of the citizens ’ investment portfolio. the outflow of funds, with capital taking shelter exclusively in us treasury bonds, had a strong impact on emerging economies as a whole. latin america was no exception. in perspective, the portfolio investment capital flow in brazil, for instance, decreased by 75 percent against the previous year. in september and october alone, brazil showed an investment capital outflow of almost usd 10 billion. against this backdrop, virtually all central banks in the region had to actively intervene in the foreign exchange market to reduce pressure on their exchange rates and prevent a feedback loop from the plummeting on the domestic demand for money. thus, the two largest economies in the region have sold around usd 30 billion in the spot market. meanwhile, medium - sized economies, such as peru, have sold almost usd 6 billion in order to stabilize their money markets as from october. moreover, most central banks in the region have supplemented this generalized direct intervention with strong operations in derivatives markets, especially in the form of swaps. this explains why the private sector demand for money was below our calculations. given this new scenario, which i will thoroughly address in a few moments, one can see that any action towards forcing the trend of this monetary aggregate to comply with expectations but under very different international conditions would have been more detrimental than beneficial for the economy as a whole. finally, the wider aggregate in pesos ( means of payment plus time deposits, or m3 ) is expected to reach an annual growth rate of 14. 7 percent by year - end. in spite of persistent volatility in international markets, domestic demand for money has recovered as from the second half of november. in fact, m2 grew by 1. 4 percent throughout november, whereas m3 increased by 0. 9 percent. bank funding to enterprises and households continues to grow, although at a lower pace, against a background of limited credit risk. loans to the private sector in pesos were expected to grow by about 25 percent in 2008,