ECB Lifts Inflation Projections Amid War-Induced Energy Shock

The European Central Bank (ECB) has updated its growth and inflation projections, signaling that it expects the war-induced energy shock to have a lasting impact on prices. The bank lifted its inflation outlook, predicting an average of 2.5% next year, up from 2.3% in June. This revision comes as inflation soared past 3% this summer.

Despite the higher-than-expected inflation rate, the ECB's projections suggest that the economy is more resilient to the energy price shock than previously thought. Consumption, investment, and industrial output are holding up well, indicating that firms and households are adapting quickly to the changing environment.

The ECB's baseline projections for inflation and GDP growth are as follows: 2026 - 0.9% GDP growth (0.8%), 3.0% inflation (3.0%), and 2.5% core inflation (2.5%). For 2027, the bank predicts 1.4% GDP growth (1.2%), 2.5% inflation (2.3%), and 2.6% core inflation (2.5%).