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The latest ECB Survey of Professional Forecasters (SPF) showed a complex environment for the Eurozone economy in the short-term, characterized by higher inflationary pressures and softening growth. Professional forecasters have adjusted their expectations for headline inflation, as measured by the Harmonised Index of Consumer Prices (HICP), projecting a rate of 2.7% for 2026 and 2.1% for 2027. These figures represent upward revisions from the previous quarterly survey. Looking further ahead though, expectations for 2028 remain steady at 2.0%, aligning with the ECB’s medium-term target.
Core inflation expectations, which provide a clearer view of underlying price pressures by stripping out volatile energy and food costs, have also seen near-term increases. Forecasters now anticipate core HICP at 2.2% for both 2026 and 2027, with a slight cooling to 2.1% in 2028. Despite these adjustments, long-term expectations remain anchored.
The outlook for real economic activity saw downward revisions. Analysts now expect the Eurozone economy to expand by 1.0% in 2026, 1.3% in 2027, and 1.3% in 2028. The 2026 and 2027 forecasts were trimmed by 0.2 and 0.1 percentage points respectively, compared to the start of the year. This is largely attributed to the Middle East conflict, specifically the negative economic impact of elevated energy prices. Similar to the inflation outlook, the long-term growth potential for the region is viewed as stable.
The labor market appears to be a point of relative resilience. Unemployment rate expectations have held steady across the board. Respondents project the unemployment rate to sit at 6.3% in 2026, gradually falling to 6.2% in 2027 and reaching 6.1% by 2028. This 6.1% level is also expected to persist into the longer term.
These forecasts are of course dependent on the Strait of Hormuz closure. If the Strait were to be reopened, energy prices would drop significantly, leading to an upward revision for growth and and downward revision for inflation.
This article was written by Giuseppe Dellamotta at investinglive.com.