Belgium: The slowdown in euro-area inflation will still leave it just above the European Central Bank’s 2 per cent target in 2025, according to economists polled by Bloomberg.
The headline and underlying measures are both predicted to average 2.1 per cent 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 per cent in the first quarter before easing to 3.6 per cent 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 per cent in 2025, prompting the ECB to push on with the most aggressive spell of interest-rate hikes in its history.
Europe’s economy has proved more resilient than feared in the face of Russia’s war in Ukraine and may dodge even a shallow recession. Respondents see a 0.2 per cent contraction in gross domestic product in the first quarter, followed a rebound. GDP will grow 0.4 per cent in 2023 and 1.2 per cent in 2024, the survey predicts.
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 per cent from 2.5 per cent 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.