Inflation in the euro area is likely to be slightly higher than expected this year, but is unlikely to exceed the European Central Bank’s (ECB) 2% target, according to the Survey of Professional Forecasters published on Tuesday, the 22nd of April, according to Reuters.
The ECB cut interest rates for the seventh time in a year on Thursday, saying that disinflation is in full swing and risks are rising that price growth will be even lower than previously forecast.
The ECB’s survey, often a key element of policymaking, showed inflation would average 2.2% in 2025, up from the 2.1% forecast three months ago, while the 2026 figure was raised to 2.0% from 1.9%.
HOWEVER, THESE RESULTS MIGHT NOT BE SO SIGNIFICANT NOW, AS THE SURVEY WAS CARRIED OUT BEFORE THE UNPREDICTABLE TRADE DECISIONS OF THE US
and financial markets have changed significantly since then.
The euro has firmed sharply against the dollar and energy prices have fallen, which could significantly slow inflation. Trade barriers and tensions with the US could also drastically slow economic growth and affect prices.
However, the survey showed only a slight revision of the growth outlook, with growth in 2025 at 0.9% compared to the previous figure of 1.0%, suggesting that trade tensions have not yet been taken into account.
ECB President Christine Lagarde had previously argued that a full-blown trade war could reduce growth to 0.5 percentage points.
Before the US tariffs were announced in early April, the situation of euro area companies had also started to improve, mainly because the industrial sector had started to recover, the ECB said.
Although uncertainty remained high, companies noticed that demand for machinery and equipment was picking up and the first signs of an improvement in the construction sector were emerging.
However, in the weeks leading up to the tariffs, companies claimed that even the employment outlook was improving slightly, although they focused on efficiency rather than hiring.
Until the end of March, firms also said they were taking a wait-and-see stance about tariffs and were not yet reassessing major investments, the ECB added.