ECB Forecasts Higher Inflation as Energy Prices Fuel Growth Concerns

The European Central Bank (ECB) has revised its economic projections, expecting inflationary pressures to persist into 2027 due to rising energy prices stemming from the war in the Middle East.

Inflation is now projected at 2.5% for 2027, up from the previously forecast 2.3%, while growth forecasts have been revised up to 0.9% for 2026 and 1.4% for 2027.

The ECB raised interest rates by a quarter of a percentage point to 2.5%, its highest level since March 2025, in an attempt to curb demand and limit companies' ability to raise prices.

The decision was made in response to surging energy prices, which have pushed inflation in the euro area to 3.3% in August, its highest level in three years.