ECB: 2027 Core Will Be The Focus Of Updated Projections

The ECB’s June projections are expected to feature higher inflation and lower growth relative to the March baseline. The primary focus should be on the 2027 core projection, which will be the best indicator of the ECB’s assessment of second round inflation risks. Of the previews we have seen, the median analyst expects 2027 inflation at 2.4%, up from 2.2% in the March baseline but below the 2.7% in the March adverse scenario. A 2.5+% reading would validate expectations for three hikes this year, and potentially pull forward expectations for a sequential hike in July. 

• However, some analysts (SEB, HSBC) expect 2027 core inflation to come in as low as 2.2%, while four analysts expect a 2.3% projection. 
• The growth outlook provides another potential limiting factor to hike pricing. The median analyst looks for 2026 growth at 0.7% (vs 0.9% March baseline, 0.6% March adverse) and 2027 growth at 1.2% (vs 1.3% March baseline, 1.2% March adverse). Downside risks to the growth outlook could limit the passthrough of the energy shock into underlying inflation, and is an increasing concern amongst more dovish Governing Council members.
• The June projections are expected to feature scenarios as in March. Some analysts expect an updated adverse scenario to include slower normalisation of oil prices compared to the current term structure.
• Most analysts expect the technical assumptions cut-off to be May 20, but some look for a later date (Morgan Stanley: May 27, Nordea: June 3).