The slowdown in euro-area inflation will still leave it just above the European Central Bank’s 2% target in 2025, according to economists polled by Bloomberg.
The headline and underlying measures are both predicted to average 2.1% that year, according to a Bloomberg survey of economists — the first that covers the period.
Core inflation, which excludes volatile items like energy and is currently of particular concern for the ECB, will peak at its current level of 5.2% in the first quarter before easing to 3.6% in the final three months of this year, the poll shows.
The projections offer a glimpse of what the ECB’s new quarterly forecasts may look like when they arrive next month following the recent weather-induced retreat in natural gas prices. The last set, in December, had core inflation at 2.4% in 2025, prompting the ECB to push on with the most aggressive spell of interest-rate hikes in its history.
Germany is the only economy among the euro area’s four largest that’s seen shrinking this year, while Spain is set to record the speediest pace of expansion.
The ECB is still expected to raise its key policy rate to a peak of 3.25% from 2.5% at present. That includes another 50 basis-point increase in March, which officials pledged at their last meeting, and a quarter-point hike after that.
The first rate cut is now penciled in for the second quarter of 2024.
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