ECB forecasters raise inflation, cut growth outlook
The latest ECB Survey of Professional Forecasters shows upward revisions for near-term HICP inflation and downward revisions for real GDP growth in 2026 and 2027. Longer-term expectations for both indicators remain unchanged.
Inflationary pressures persist
Respondents to the European Central Bank's (ECB) Survey of Professional Forecasters (SPF) have revised up their near-term expectations for headline and core HICP inflation.
Headline inflation is now projected at 2.7 percent for 2026 and 2.1 percent for 2027, both higher than in the previous survey.
For 2028, it remains at 2.0 percent.
Core HICP inflation, excluding energy and food, also saw upward revisions, reaching 2.2 percent for both 2026 and 2027, and 2.1 percent for 2028.
Longer-term inflation expectations for 2030 are unchanged at 2.0 percent for both measures.
Conversely, real GDP growth expectations were revised down for 2026 to 1.0 percent (from 1.2 percent) and for 2027 to 1.3 percent (from 1.4 percent).
The 2028 and longer-term growth forecasts held steady at 1.3 percent.
These revisions reflect a more challenging near-term economic outlook, with persistent price pressures alongside weaker growth prospects.
Growth headwinds and stable job market
The downward revisions to real GDP growth were primarily attributed to the anticipated negative impact of elevated energy prices, stemming from the ongoing conflict in the Middle East.
This factor is expected to weigh on economic activity in the euro area over the next two years.
In contrast, expectations for the unemployment rate remained entirely unchanged across all horizons, with forecasters projecting 6.3 percent for 2026, 6.2 percent for 2027, and 6.1 percent for 2028 and the longer term.
Wage growth expectations, however, saw an upward adjustment, with forecasts now at 3.3 percent for 2026 and 3.1 percent for 2027.
The Q2 2026 SPF was conducted between March 31 and April 8, 2026, gathering 56 responses.
Stagflationary shadows
The latest SPF results paint a challenging near-term picture for the euro area, suggesting persistent inflation alongside weaker economic expansion.
This combination of upward inflation revisions and downward growth forecasts points to a potential stagflationary environment.
Such a scenario complicates the ECB's monetary policy path, demanding a delicate balance between price stability and economic support.