Analysts Expect Inflation in Eurozone to Ease Sooner than Predicted

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Analysts surveyed by the European Central Bank (ECB) have revised their expectations for inflation in the eurozone, predicting that it will reach the bank’s 2% target earlier than previously estimated. This marks a hopeful sign of diminishing inflation concerns.

According to a recent ECB survey conducted ahead of its rate-decision meeting, analysts now anticipate inflation to reach 2% by the third quarter of 2025 and remain stable thereafter in the long run. In comparison, the previous survey in October had projected the target to be met only by the second quarter of 2026.

The survey also revealed that core inflation, which excludes food and energy prices and is considered a more reliable measure of underlying inflation, is expected to reach 2% in the third quarter of 2025. However, this forecast remains unchanged since October.

In November of this year, the inflation rate in the euro area stood at 2.4%, which is a notable decline from its peak of 10.6% recorded in October 2022.

The analysts’ projections for economic growth in the eurozone have also been adjusted. They now anticipate a decline of 0.1% in GDP for the fourth quarter of 2023, which is a weaker reading compared to the previously forecasted flat growth. However, there should be a slight recovery with a growth rate of 0.1% expected in the first quarter of 2024, remaining unchanged from the prior forecast.

The projected slower growth may have influenced analysts’ expectations for interest-rate cuts as well. They now anticipate the ECB to reduce its key deposit rate sooner than previously thought, with the first cut expected in July instead of September as initially forecasted.

Overall, these revised projections provide a more optimistic outlook for inflation levels in the eurozone and offer potential opportunities for economic recovery.

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