Eurozone inflation to rebound to target next year, ECB survey shows

[FRANKFURT] Eurozone inflation is likely to remain broadly on the same path as seen three months ago, dipping below 2 per cent this year, then returning to target in 2027, the European Central Bank’s Survey of Professional Forecasters showed on Friday (Feb 6).

The ECB left interest rates unchanged on Thursday, arguing that its own inflation outlook is broadly unchanged and policymakers still saw price growth returning to the 2 per cent target in the medium term after a well-telegraphed dip this year.

ECB President Christine Lagarde also said that risks remained unusually high but were broadly balanced, so policy was in a ‘good place’.

The ECB’s survey sees inflation at 1.8 per cent this year and 2.0 per cent next year, in line with predictions made three months ago. Price growth will then rise to 2.1 per cent in 2028 but remain at 2.0 per cent over the ‘longer term,’ which is defined as 2030.

Economic growth could be marginally higher this year, at 1.2 per cent versus the 1.1 per cent predicted three months earlier. It will then pick up to 1.4 per cent next year, the survey, a key input in policy deliberations, showed.

Unemployment predictions also stayed unchanged, with the jobless rate seen at 6.3 per cent this year, 6.2 per cent in 2027, the ECB said.

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Financial markets see a one-in-five chance that the ECB will still cut interest rates but investors expect rates to go up next year, mostly as Germany’s fiscal splurge on defence and infrastructure lifts growth. REUTERS