The European Central Bank (ECB) published its Survey of Professional Forecasters for the fourth quarter of 2026, showing higher euro area inflation and growth expectations for 2026 and 2027. Higher energy prices and their indirect effects drove the inflation revisions, while recent economic data primarily explained the growth upgrades. Longer-term expectations for both headline and core inflation remained at 2.0% for 2031. Respondents expected headline inflation, measured by the Harmonised Index of Consumer Prices, of 3.0% in 2026 and 2.6% in 2027, increases of 0.3 and 0.4 percentage points from the previous survey. The 2028 forecast remained at 2.0%. Core inflation expectations, excluding energy and food, were unchanged at 2.4% for 2026 but rose to 2.5% for 2027 and 2.2% for 2028. Responses to a special question on the war in the Middle East indicated that additional effects of the energy price shock were expected mainly in 2027, while second-round effects were expected to remain limited. Inflation risks were tilted to the upside for 2026-28 and were more balanced thereafter. Real gross domestic product growth expectations rose by 0.4 percentage points to 1.0% for 2026 and by 0.1 percentage points to 1.3% for 2027. Growth expectations for 2028 remained at 1.3%, with risks tilted somewhat to the downside across all horizons. The expected unemployment rate increased by 0.1 percentage points to 6.4% for 2026, while subsequent forecasts were unchanged, declining gradually to 6.1% in 2031.

Original source