Professional forecasters surveyed by the European Central Bank raised their inflation expectations for 2026 and 2027, mainly because of higher energy prices. Longer-term expectations stayed at 2.0%.
The Survey of Professional Forecasters for the fourth quarter of 2026 showed higher inflation expectations for 2026 and 2027 from the ECB. Longer-term expectations remained anchored at 2.0%.
Energy prices drive the upward revisions
The survey, conducted between October 2 and October 7 with 52 responses, put headline inflation, measured by the Harmonised Index of Consumer Prices, at 3.0% for 2026, 2.6% for 2027 and 2.0% for 2028. Forecasters revised the 2026 and 2027 figures up by 0.3 and 0.4 percentage points from the previous round, while 2028 was unchanged.
The upward revisions were primarily attributed to higher energy prices and their indirect effects. Longer-term expectations for 2031 stayed at 2.0% for both headline and core inflation.
A special question on the war in the Middle East suggested that additional effects of the energy price shock are mainly expected for 2027, while second-round effects will remain limited. The risk balance for inflation was tilted to the upside for 2026-28 but remained more balanced thereafter.
Core inflation and growth forecasts
Core inflation expectations stood at 2.4% for 2026, 2.5% for 2027 and 2.2% for 2028. Forecasters revised the 2027 and 2028 figures up by 0.2 and 0.1 percentage points respectively, while 2026 remained unchanged.
Real GDP growth expectations were set at 1.0% for 2026 and 1.3% for both 2027 and 2028. Those figures rose by 0.4 percentage points for 2026 and 0.1 percentage points for 2027, primarily reflecting recent data. The balance of risks for growth was tilted somewhat to the downside for all horizons.
Unemployment rate expectations were set at 6.4% for 2026, slightly higher than the previous survey, before declining gradually to 6.1% in the longer term.
Source: Investing.com
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