ECB Raises Growth, Inflation Projections Amid Energy Price Concerns
The European Central Bank (ECB) has revised its growth and inflation projections, suggesting that it expects the war-induced energy shock to dissipate slowly. Inflation soared past 3% this summer and is likely to remain high for some time, raising concerns about a potential wage-price spiral.
According to the ECB's baseline projections, inflation is expected to average 2.5% next year, up from 2.3% previously forecasted. Underlying inflation is also seen at 2.6% in 2027, above the 2.5% predicted earlier.
The labour market appears relatively soft, which may limit the risk of a wage-price spiral. However, expensive energy prices could eventually lift costs for other goods and services, forcing the ECB to tighten monetary policy further after two rate hikes this year.