The European Central Bank's Survey of Professional Forecasters indicated a downgrade in inflation expectations for the euro area this year and next. This downgrade, announced Friday, is due to falling oil prices, a weaker economy, and lower actual inflation figures. Predictions for this year's headline inflation have been reduced to 2.4 percent from 2.7 percent, while next year's estimate has been adjusted to 2.0 percent from 2.1 percent. Moreover, inflation is predicted to remain steady at 2.0 percent in 2026.
Revisions were not just limited to inflation. Longer-term expectations for headline HICP inflation were also adjusted downwards to 2.0 percent. Furthermore, respondents have scaled down the real GDP growth outlook for 2024 and 2025. The euro area's expected growth is now at 0.6 percent, a decrease from the initial estimate of 0.9 percent.
The growth forecast for 2025 has similarly been trimmed down to 1.3 percent from 1.5 percent. Proponents are eyeing a growth rate of 1.4 percent in 2026, a figure that was not surveyed in the previous round. However, longer-term growth expectations remain stable at 1.3 percent.
Despite the downward adjustments, respondents anticipate a continuous, albeit gradual, decrease in the unemployment rate. Starting from 6.7 percent this year, they foresee it dropping to 6.5 percent in 2026 and maintaining the downward trend in the longer term.
In recent news, the European Central Bank made no changes to its key interest rates during its third policy session, leaving the refi rate stable at 4.50 percent.
