Eurozone inflation seen rising before easing toward ECB target
Respondents now see inflation averaging 2.7% in 2026, up from a previous estimate of 1.8%. Price growth is projected to slow to 2.1% in 2027 and 2% in 2028.
The outlook reflects uncertainty linked to the Middle East conflict and higher energy prices, which are also weighing on growth expectations. An ECB corporate survey warned that a prolonged war could disrupt supply chains and increase price pressures, though the impact of energy costs may pass through more gradually than in past shocks.
The ECB kept interest rates unchanged last week but signaled a possible hike if inflation risks persist. Joachim Nagel said a rate increase may be needed without improvement in the outlook, while Yannis Stournaras cautioned that recession risks remain. Olli Rehn noted limited signs of sustained war-driven inflation.
Companies reported that rising oil prices are quickly feeding into costs, though larger firms are better shielded than during the 2022 energy crisis. Still, shortages of key inputs like hydrogen and helium could add to inflation if the conflict drags on.
Wage growth is expected to moderate to 2.9% this year and 2.8% in 2027, although some firms see upside risks linked to the ongoing conflict.
Source:AA
