Inflation has declined since the last meeting of the European Central Bank, with inflation falling in 2024 to 2.3%, and core inflation also falling to 2.6%, in addition to a significant decline in energy prices.
Most inflation pressures have eased, but wage growth pressures continue to exert upward pressure on inflation.
Growth is expected to remain weak in the euro area in the near term, with growth gradually recovering, supported by consumption first, then investment later.
The European Central Bank believes that maintaining current interest rates at these restrictive levels may ensure that inflation returns to its target.
The unemployment rate is at its lowest levels ever amid a labor shortage. Monetary and financial policies must be strengthened to support the economy in a sustainable manner. Spending on sustainable development of bank investments must also be supported.
Past supply shocks continue to ease, but geopolitical crises continue to pose some risks to disinflation.
Long-term inflation expectations are stable around 2%, with ECB economists now forecasting inflation to average 2.3% in 2024, 2.0% in 2025, and 1.9% in 2026.
Inflation expectations excluding energy and food were revised down to average 2.6% in 2024, 2.1% in 2025, and 2.0% in 2026.
The bank revised down its 2024 growth forecast to 0.6%, with economic activity expected to remain weak in the near term. After that, experts expect the economy to rebound and grow by 1.5% in 2025 and 1.6% in 2026.
