Eurozone inflation will stay hotter than expected in 2025 and 2026, says ECB
Inflation across the Eurozone will run hotter than expected for the next two years, the European Central Bank confirmed on Tuesday, according to its second-quarter 2025 Survey of Professional Forecasters.
Analysts revised headline inflation forecasts upward, now seeing 2.2% in 2025 and 2.0% in 2026, both up by 0.1 percentage points from earlier this year. For 2027, inflation stays flat at 2.0%. These forecasts are based on the Harmonised Index of Consumer Prices, the ECB’s standard measure of inflation.
Expectations for core inflation, which strips out volatile energy and food prices, also moved higher across all timeframes. The projection for long-term core inflation now sits at 2.0%, adjusted slightly up from the last survey.
Longer-term headline inflation stayed locked at 2.0%, showing the ECB doesn’t expect runaway prices—just that things won’t calm down as fast as hoped.
Forecasts for Eurozone GDP growth also changed, as analysts now expect real GDP to expand by only 0.9% in 2025, down 0.1 points from earlier predictions. In 2026, growth is set at 1.2%, also 0.1 points lower, according to the ECB’s survey.
By 2027, the picture brightens slightly with 1.4% growth, a 0.1 point upward revision. Beyond that, long-term GDP growth remains unchanged at 1.3%, meaning the central bank sees no meaningful economic acceleration coming anytime soon.
The job market forecast got a small boost. The expected average unemployment rate across 2025 to 2027 is now 6.3%, a bit lower than before. Beyond 2027, the ECB sees unemployment falling to 6.2%. While not dramatic, it shows a slight tightening of the labor market.
Trump’s return fuels uncertainty in the Eurozone
The updated forecasts come just under three months into Donald Trump’s second term as US president, a reality already shaking Europe’s political and economic foundations.
Trump declared the European Union was created to “screw the United States,” and followed that up with tariffs targeting European goods. His White House has shown little interest in defending NATO allies, raising doubts about transatlantic commitments.
Trump has cozied up to Vladimir Putin, dismissed Volodymyr Zelenskyy, and floated solutions to the war in Ukraine that would directly undercut European security. His national security team even insulted Europe in a Signal chat, calling the continent “pathetic,” while his vice-president mocked European democratic systems.
Economists and policymakers now see a window to push internal reforms. Finishing the capital markets union and banking union could unlock nearly €3 trillion in idle savings across the Eurozone, freeing it for cross-border investment. Talks about this have stalled for years, but the change in Washington may finally light a fire under Brussels.
With the US turning inward, European leaders are seeking deals with countries and regions still interested in cutting tariffs, not using them as political weapons. There’s increased focus on expanding deals with Asia, Africa, and South America, where nations now view the EU as more stable than an isolationist US or a hostile Russia.
Europe is also discussing ways to build joint defense capabilities, in case Trump pulls the US away from NATO responsibilities, according to a report from The Guardian.
These talks reportedly include possible military support to Ukraine, especially in the form of medium-range missiles, to fill the vacuum left by US reluctance. Some officials argue Europe must prepare to defend its own interests with or without American help.
There’s also momentum behind building global alliances with other pro-democracy countries like Japan, India, Canada, and Australia, all of whom are increasingly skeptical of US foreign policy under Trump. European diplomats are pushing for stronger coalitions to protect liberal democracies and keep global trade flowing under agreed rules.
Despite all this friction, Europe isn’t giving up on the transatlantic economy. The EU and US still maintain the world’s largest bilateral investment relationship, with over $5 trillion in combined assets in 2023. And the Eurozone remains the biggest single market on the planet, home to 448 million consumers.
Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot
Read More
Dollar slump puts pressure on global central banks: devalue their currencies or stay strong?
Pre-markets trade: Trump’s attacks on Powell worry US assets investors
Eurozone inflation will stay hotter than expected in 2025 and 2026, says ECB
Inflation across the Eurozone will run hotter than expected for the next two years, the European Central Bank confirmed on Tuesday, according to its second-quarter 2025 Survey of Professional Forecasters.
Analysts revised headline inflation forecasts upward, now seeing 2.2% in 2025 and 2.0% in 2026, both up by 0.1 percentage points from earlier this year. For 2027, inflation stays flat at 2.0%. These forecasts are based on the Harmonised Index of Consumer Prices, the ECB’s standard measure of inflation.
Expectations for core inflation, which strips out volatile energy and food prices, also moved higher across all timeframes. The projection for long-term core inflation now sits at 2.0%, adjusted slightly up from the last survey.
Longer-term headline inflation stayed locked at 2.0%, showing the ECB doesn’t expect runaway prices—just that things won’t calm down as fast as hoped.
Forecasts for Eurozone GDP growth also changed, as analysts now expect real GDP to expand by only 0.9% in 2025, down 0.1 points from earlier predictions. In 2026, growth is set at 1.2%, also 0.1 points lower, according to the ECB’s survey.
By 2027, the picture brightens slightly with 1.4% growth, a 0.1 point upward revision. Beyond that, long-term GDP growth remains unchanged at 1.3%, meaning the central bank sees no meaningful economic acceleration coming anytime soon.
The job market forecast got a small boost. The expected average unemployment rate across 2025 to 2027 is now 6.3%, a bit lower than before. Beyond 2027, the ECB sees unemployment falling to 6.2%. While not dramatic, it shows a slight tightening of the labor market.
Trump’s return fuels uncertainty in the Eurozone
The updated forecasts come just under three months into Donald Trump’s second term as US president, a reality already shaking Europe’s political and economic foundations.
Trump declared the European Union was created to “screw the United States,” and followed that up with tariffs targeting European goods. His White House has shown little interest in defending NATO allies, raising doubts about transatlantic commitments.
Trump has cozied up to Vladimir Putin, dismissed Volodymyr Zelenskyy, and floated solutions to the war in Ukraine that would directly undercut European security. His national security team even insulted Europe in a Signal chat, calling the continent “pathetic,” while his vice-president mocked European democratic systems.
Economists and policymakers now see a window to push internal reforms. Finishing the capital markets union and banking union could unlock nearly €3 trillion in idle savings across the Eurozone, freeing it for cross-border investment. Talks about this have stalled for years, but the change in Washington may finally light a fire under Brussels.
With the US turning inward, European leaders are seeking deals with countries and regions still interested in cutting tariffs, not using them as political weapons. There’s increased focus on expanding deals with Asia, Africa, and South America, where nations now view the EU as more stable than an isolationist US or a hostile Russia.
Europe is also discussing ways to build joint defense capabilities, in case Trump pulls the US away from NATO responsibilities, according to a report from The Guardian.
These talks reportedly include possible military support to Ukraine, especially in the form of medium-range missiles, to fill the vacuum left by US reluctance. Some officials argue Europe must prepare to defend its own interests with or without American help.
There’s also momentum behind building global alliances with other pro-democracy countries like Japan, India, Canada, and Australia, all of whom are increasingly skeptical of US foreign policy under Trump. European diplomats are pushing for stronger coalitions to protect liberal democracies and keep global trade flowing under agreed rules.
Despite all this friction, Europe isn’t giving up on the transatlantic economy. The EU and US still maintain the world’s largest bilateral investment relationship, with over $5 trillion in combined assets in 2023. And the Eurozone remains the biggest single market on the planet, home to 448 million consumers.
Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot
Read More
Dollar slump puts pressure on global central banks: devalue their currencies or stay strong?