ECB Increases Growth and Inflation Projections as Energy Shock Lingers
ECB Updates Economic Outlook Amid Persistent Energy Shock
FRANKFURT, Sept 10 (Reuters) - The European Central Bank raised some of its growth projections on Thursday and also lifted its inflation outlook, suggesting that it expects a war-induced energy shock to dissipate only slowly.
Inflation Trends and Projections
Inflation soared past 3% this summer and is likely to stay high for some time, raising the risk that expensive energy will eventually lift the cost of other goods and services, forcing the ECB to tighten even further after two rate hikes this year.
Updated Inflation Forecasts
Inflation is now seen averaging 2.5% next year, above the 2.3% seen in June while underlying inflation is seen at 2.6% in 2027, above the 2.5% forecast earlier.
Labour Market Impact
But a relatively soft labour market limits the risk that workers will demand compensation for higher prices, setting off a hard-to-beat wage-price spiral.
Economic Resilience and Adaptation
The economy nevertheless appears more resilient to the energy price shock than many had predicted. Consumption, investment and industrial output are holding up well, indicating that firms and households are quickly adapting to a rapidly shifting environment.
ECB Baseline Projections for Inflation and GDP Growth
The following are the ECB's baseline projections for inflation and GDP growth. Its previous projections from June are in brackets.
Growth and Inflation Data
2026 2027 2008
GDP Growth: 0.9% (0.8%) 1.4% (1.2%) 1.5% (1.5%)
Inflation: 3.0% (3.0%) 2.5% (2.3%) 2.1% (2.0%)
Core inflation 2.5% (2.5%) 2.6% (2.5%) 2.3% (2.2%)
(Reporting by Balazs Koranyi; Editing by Catherine Evans)
