FRANKFURT, July 24 (Reuters) – Euro zone inflation expectations remained broadly unchanged over the past three months and price growth is seen falling quickly next year before returning back to the 2% target in 2028, a European Central Bank survey showed on Friday.
Inflation, the ECB’s primary focus, has been running at about 3% for months due to surging energy costs, but most economists think price growth is close to peaking and will decline back towards the target sometime in 2027.
The survey, a key input in policy deliberations, showed inflation averaging 2.7% this year, unchanged from the previous projection, while the 2027 figure was raised to 2.2% from 2.1%. Inflation will then hit 2% in 2028 and stay there, the survey showed.
The ECB left interest rates unchanged on Thursday as the energy price surge has yet to generate second-round effects that could perpetuate rapid inflation, but it clearly hinted at more tightening ahead, possibly as soon as September.
The ECB also stayed on hold because economic growth remained lukewarm, and fresh survey projections highlighted this weakness.
Growth this year is seen at 0.6%, below the 1.0% projected three months earlier, while next year’s growth was lowered to 1.2% from 1.3%.
(Reporting by Balazs Koranyi;Editing by Helen Popper)
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