As anticipated, annual HICP inflation in July fell further into negative territory, reflecting mainly temporary effects. After a return to positive inflation rates during the second half of the year, we continue to expect price developments to remain subdued over the policy-relevant horizon.
Recent data releases and survey information still suggest that economic activity over the remainder of this year is likely to remain weak, although the pace of contraction is clearly slowing down. This assessment takes into account adverse lagged effects, such as a further deterioration in labour markets, which are likely to materialise over the coming months.