European Central Bank outlines euro area outlook with 2026 inflation at 3.0 percent and growth at 0.8 percent

The European Central Bank published background slides for a Reuters NEXT presentation by Executive Board member Philip R. Lane setting out its latest view of the euro area economy. The material centres on the June 2026 Eurosystem staff projections, which show headline inflation remaining above target in 2026 before easing back, while growth weakens and then gradually recovers. Under the baseline, Harmonised Index of Consumer Prices inflation is projected at 3.0 percent in 2026, 2.3 percent in 2027 and 2.0 percent in 2028. Real gross domestic product growth is projected at 0.8 percent in 2026, 1.2 percent in 2027 and 1.5 percent in 2028. Compared with the December 2025 projections, the ECB’s June baseline points to materially higher inflation and weaker near-term growth. Headline inflation was revised up by 1.1 percentage points for 2026 and 0.5 percentage points for 2027, while real GDP growth was revised down by 0.4 percentage points for 2026 and 0.2 percentage points for 2027. The projections embed much higher energy price assumptions than in December, including oil at USD 96.9 in 2026 and natural gas at EUR 45.6 per megawatt-hour, helping to explain projected HICP energy inflation of 8.4 percent in 2026. Core measures remain more persistent, with HICP excluding energy and food at 2.5 percent in both 2026 and 2027 before easing to 2.2 percent in 2028. The labour market stays comparatively stable in the baseline, with unemployment at 6.3 percent in 2026, 6.2 percent in 2027 and 6.0 percent in 2028. The slides also present alternative energy price scenarios, indicating that different commodity price paths could materially change the inflation and growth outlook.