I will start by giving you an overview of the economic outlook for the euro area before going on to look at how the ECB has adjusted its monetary policy to this outlook. I will then discuss in more detail the transmission of our monetary policy in the current environment and the sources of uncertainty that appear particularly relevant at this stage.

The outlook for inflation and growth in the euro area

Economic activity broadly stagnated over the first half of the year and is likely to remain subdued in the coming months. Weaker foreign demand and tight financing conditions are dampening growth, especially in the manufacturing sector. The services sector, which had been resilient so far, is now starting to “catch down” to manufacturing.