ECB survey shows quicker return of inflation to target

FRANKFURT (Reuters) – Euro zone inflation could return to the European Central Bank’s 2% target sooner than earlier thought and will likely hover around this level even in the longer term, a fresh ECB survey showed on Friday.

The ECB lowered interest rates for the third time this year on Thursday on moderating price pressures and investors now see rate cuts at each of its next four or five meetings as inflation is within striking distance of 2%.

Economists in the ECB’s Survey of Professional Forecasters now see inflation next year at 1.9%, below the 2% predicted three months ago, and see it holding at 1.9% in 2026.

This is somewhat quicker than the ECB’s own forecast, which puts inflation back at target only in the final quarter of 2025, and sees the year’s average at 2.3%.

In the longer term, defined as 2029, inflation is seen at 2.0%, right on the ECB’s target.

The bank has spent the past three years fighting the worst bout of inflation in over a generation but some policymakers now think there is a realistic risk the bank could return to undershooting 2%.

Forecasts for underlying inflation, a key concern for policymakers because of rapid price growth in services, was unchanged at 2.2% in 2025 and 2.0% in 2026.

The survey, an important input in the ECB’s policy deliberations, also predicted economic growth at 1.2% next year, below the 1.3% seen earlier, which would then accelerate to 1.4% in the following year.

Unemployment is also seen relatively stable, holding at 6.5% next year and dropping to 6.4% by 2026, the survey showed.