Inflation expected to stay above ECB target in medium term, survey finds

(Reuters) – Economists expect inflation rates to stay above the European Central Bank’s 2% target in the medium term, according to a survey published by Germany’s Ifo institute on Wednesday, a day before the central bank holds its next monetary policy meeting.

In the eurozone, economists expect inflation to reach 2.6% this year, according to the quarterly survey, which is conducted by Ifo together with the Swiss Economic Policy Institute.

In Germany, inflation for this year is expected to reach 2.4%, in Austria 3.1% and in France 2.3%, Ifo said.

“Inflation is also expected to exceed the European Central Bank’s target of 2% in the medium term,” Ifo researcher Niklas Potrafke said in a statement, adding: “Due to these stagnating inflation expectations, central banks could hold back on further interest rate cuts.”

However, the ECB is expected to deliver a further interest rate cut this week, with ECB chief Christine Lagarde having said confidence in falling inflation would be reflected in the bank’s decision.