MNI BRIEF: EC Sees Inflation Hovering Around ECB Target

The European Commission's Autumn economic projections see the inflation outlook up slightly from its earlier forecasts in the Spring. 

Headline euro area inflation is now projected to decline from 2.4% in 2024 to 2.1% in 2025, ease to 1.9% and edge up again to 2.0% in 2027, although "on a quarterly basis, inflation is set to hover around the ECB’s 2% target throughout the forecast horizon," the Commission said. 

The forecasts assume that ETS2 will come into force in 2027, despite the Nov 5 decision of EU states to suspend the trading scheme for a year to 2028, a decision which the European Parliament has subsequently approved. ETS2 is estimated to lift consumer energy prices over the course of 2027 by around 3% in the euro area, with the ECB expecting it to add about 0.3pp to headline inflation in 2027 under actual current legislation. (see MNI: EU Member States Plot Further ETS2 Pushback -Officials 

Driven by stronger-than-expected growth over recent quarters, the Commission also expects higher growth of 1.3% in 2025, 1.2% in 2026, and 1.4% in 2027, noting that growth has proved resilient even after front-loading effects ahead of US tariffs effects have been taken into account. The forecasts have a cut-off date on all assumptions of October 27. 

Source: European Commission Autumn Forecasts