Inflation should remain above 2% long term in the euro zone, according to a survey of economists published Friday by the European Central Bank (ECB), which confirms the fears of the institution and reinforces its decision to sharply raise its rate.
This quarterly survey of forecasters shows that they have revised their inflation expectations upwards for all time horizons, according to a press release from the ECB.
For 2022, 2023 and 2024, these amount respectively to 7.3%, 3.6% and 2.1%, i.e. 1.3, 1.2 and 0.2 percentage point more than during the previous survey.
This revision is linked to the rise in energy and food prices, but also to the stronger impact than expected from increases in the cost of raw materials, explains the ECB.
Over the long term, in 2027, forecasters see inflation at 2.2%, still above the 2% target set by the ECB.
This survey was known Thursday by the guardians of the euro, AFP learned, and has comforted them in their surprise decision to increase interest rates by half a point. A quarter-point increase was initially expected.
It is likely that this survey influenced the Board of Governors and its decision on the rates shows that it wanted to send a strong signal to the markets, according to Frederik Ducrozet, chief economist at Pictet Wealth Management.
With inflation expected to stay above 2% for a long time, we are talking about the unanchoring of inflation expectations.
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But this must have made several members of the ECB council extremely nervous, according to Carsten Brzeski, chief economist at ING.
The survey also reveals a drop in growth forecasts from the second quarter of 2022, as well as for 2023.
July’s PMI indices, released on Friday, suggest the euro zone is on the brink of recession due to collapsing demand and rising costs.
After its historic rate hike, the ECB wants to drive home the point in the coming months to fight inflation, at the risk of aggravating the current economic slowdown.