Euro zone inflation could be a touch higher this year than earlier thought but will then stabilise at the European Central Bank’s 2% target, the bank’s Survey of Professional Forecasters showed on Tuesday.
The ECB cut interest rates for the seventh time in a year on Thursday, arguing that disinflation was well on track and risks were on the rise that price growth comes even lower than earlier thought.
The ECB’s survey, often a key input into policy deliberations, showed 2025 inflation averaging 2.2%, above the 2.1% predicted three months ago while the 2026 number was lifted to 2.0% from 1.9%.
However, these numbers may be less significant than in the past since the ECB’s cut off for collecting projections was April 4 and financial markets have shifted significantly since then due to the U.S.’s erratic trade policy.
The euro has firmed sharply against the dollar and energy prices have fallen, changes that could significantly slow inflation.
Trade barriers and tensions with the U.S. could also sharply slow economic growth and weigh on prices.
The survey, however, only showed a small revision in the growth outlook, putting the 2025 expansion at 0.9% versus the previous 1.0% number, suggesting that not all of the trade tension is yet factored in.
ECB President Christine Lagarde earlier argued that a full trade war could deduct up to 0.5 percentage point of growth.
(Reporting by Balazs Koranyi)
