FRANKFURT — A fresh survey released Friday by the European Central Bank shows that inflation expectations across the euro zone have remained largely stable over the past three months, with price growth anticipated to fall sharply next year and eventually return to the 2% target by 2028.
Inflation has been hovering around 3% for several months, driven largely by rising energy costs. Most economists believe price growth is nearing its peak and should begin declining toward the central bank’s target sometime in 2027.
The survey, which plays an important role in shaping the ECB’s policy decisions, projects average inflation of 2.7% for the current year — unchanged from the previous estimate. The 2027 forecast was nudged slightly higher, rising to 2.2% from the earlier projection of 2.1%. By 2028, the survey expects inflation to reach the 2% goal and remain there.
On Thursday, the ECB chose to leave interest rates where they are, noting that the surge in energy prices has not yet triggered so-called second-round effects — a situation where rising costs cause broader, self-sustaining inflation. However, the bank strongly signaled that additional rate increases could be coming, potentially as early as September.
The decision to hold rates steady was also influenced by sluggish economic growth across the region. New survey figures underscored that weakness, with growth for the current year now projected at just 0.6%, down from a previous estimate of 1.0%. The outlook for next year was also trimmed slightly, falling to 1.2% from 1.3%.
