Eurozone Inflation Is Expected to Rise Before Easing Toward ECB Target

(MENAFN) Inflation in the eurozone is projected to increase notably this year before gradually moving back close to the European Central Bank’s 2% target by 2027, according to a quarterly survey of professional forecasters released Monday.

The survey indicates that respondents now expect average inflation in the euro area to reach 2.7% in 2026, a significant upward revision from the previous estimate of 1.8%. Price growth is then forecast to ease to 2.1% in 2027 and settle at 2% in 2028.

Alongside inflation expectations, the report also pointed to slightly weaker economic growth projections, reflecting rising uncertainty tied to the ongoing Middle East conflict and its impact on global energy prices, which are feeding into the eurozone economy.

A separate corporate survey conducted by the European Central Bank suggested that the transmission of higher energy costs linked to the Iran conflict may unfold more slowly than in previous periods. However, it warned that sustained tensions could still intensify price pressures over time.

The ECB decided to keep its main interest rates unchanged last week but indicated that a rate increase could still be considered at its next policy meeting if inflation risks remain elevated.

Some policymakers have taken a more hawkish stance, with Germany’s Bundesbank chief Joachim Nagel stating that a rate hike may be necessary unless inflation and growth prospects improve significantly.

Others have expressed caution. Greece’s central bank governor Yannis Stournaras warned that the risk of recession is “real,” while Finland’s Olli Rehn said there are currently “no obvious signs” that war-related inflation is becoming entrenched through sustained wage and price increases.

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