ECB's Economic Bulletin Highlights Disinflation Progress

In a recent economic bulletin, the European Central Bank (ECB) expressed confidence that the disinflation process is progressing as expected, despite an upward revision of the headline inflation forecast for 2025 to 2.3%.

The report also pointed out potential downward pressures on inflation, including lower demand for euro area exports due to higher tariffs and geopolitical tensions affecting energy markets, consumer confidence, and business investment.

Economic Activity and Inflation Forecasts

The ECB Governing Council noted a modest growth in economic activity in the euro area during the fourth quarter of 2024, with the manufacturing sector contracting while services remained resilient. Looking ahead, the ECB forecasts headline inflation to average 2.3% in 2025, 1.9% in 2026, and 2% in 2027. Economic expansion is expected to be 0.9% in 2025, increasing to 1.2% in 2026, and 1.3% in 2027, with slight downward revisions from February's assessment.