The European Central Bank’s September 2026 staff projections raise the euro area growth outlook to 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. Compared with June, the forecasts are 0.1 percentage points higher for 2026 and 0.2 points higher for 2027, reflecting stronger second quarter activity, improving confidence and a more supportive near term outlook. Inflation is projected at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028, with the latter two forecasts raised by 0.2 and 0.1 points, respectively. Energy prices linked to the Middle East conflict remain the main source of inflation and forecast uncertainty. Headline inflation is expected to peak at 3.6% in the fourth quarter of 2026 before moving close to 2% as the shock fades, while domestic demand benefits from recovering real incomes, a resilient labor market and spending on infrastructure, defense and artificial intelligence. Under the severe conflict scenario, growth would fall to 0.4% and inflation would reach 5.4% in 2027, compared with baseline rates of 1.4% and 2.5%.
2026-09-10European Central Bank
European Central Bank raises euro area growth and inflation projections as economy withstands Middle East energy shock
The European Central Bank raised its euro area growth forecasts to 0.9% for 2026 and 1.4% for 2027, while leaving 2028 at 1.5%. Inflation is projected at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028 as the Middle East energy shock gradually fades. A severe conflict scenario would push 2027 inflation to 5.4% and cut growth to 0.4%.