Professional forecasters maintain high uncertainty for inflation and growth
Professional forecasters in the euro area expect inflation to be close to the 2 percent target in 2026. However, they continue to express historically high levels of uncertainty for both inflation and economic growth, according to a Banque de France analysis.
Uncertainty persists despite consensus
Professional forecasters in the euro area largely agree on the trajectory of inflation, with expectations for 2026 converging towards the European Central Bank's 2 percent target.
This indicates a low level of disagreement among experts regarding the average economic outlook.
However, despite this consensus, the individual uncertainty perceived by each forecaster remains exceptionally wide.
This individual uncertainty reflects the broad range of outcomes each forecaster considers possible for inflation and growth over a one-year horizon.
The ECB's quarterly Survey of Professional Forecasters (SPF) collects these individual probability distributions, where forecasters allocate probabilities across various economic scenarios.
The dispersion of these distributions, or variance, serves as a measure of a forecaster's personal uncertainty.
The wider the distribution, the more uncertain the situation is considered.
The latest SPF data, covering the fourth quarter of 2025, consistently shows this heightened individual uncertainty.
Standardizing the uncertainty measure
The unadjusted measure of individual uncertainty, or dispersion, mechanically increases with higher expected levels of inflation or growth.
This statistical relationship does not necessarily reflect a true increase in economic uncertainty.
To address this, a standardized indicator is developed, which adjusts for this 'level effect.'
For inflation, the adjustment neutralizes the impact of the forecast level by considering the observed relationship between reported dispersion and the distance from the 2 percent target.
A similar approach is applied to growth, comparing it to the euro area's potential growth rate – the long-term sustainable growth without inflation acceleration.
This methodology isolates the pure uncertainty component, enabling more accurate comparisons over time.
Geopolitical shadows loom large
Despite inflation nearing its 2 percent target and growth aligning with potential, professional forecasters continue to express historically high levels of uncertainty.
This paradox highlights the significant influence of geopolitical and trade factors, which create a wide range of plausible economic outcomes.
Central banks must therefore navigate an environment where the consensus on the most likely trajectory is fragile.