ECB Survey Sees Inflation Back Near Target By 2025  

• Eurozone inflation will have almost fallen back to the European Central Bank's 2% target in 2025, but economic growth will remain weak and at below 1% through next year, the ECB's quarterly Survey of Professional Forecasters showed on Friday.
• The ECB left interest rates unchanged on Thursday after the steepest set of hikes on record, arguing that inflation was finally back on track towards 2%, even if high energy costs continued to pose an upside risk. Friday's survey, a key input in the bank's policy deliberation, confirmed this outlook, predicting relatively slow but persistent disinflation over the coming two years.
• The survey sees consumer price growth at 2.7% next year, the same figure predicted three months ago but well below the ECB's own 3.2% expectation. The 2025 figures were meanwhile lowered to 2.1% from 2.2% and the longer-term forecast, defined as 2028, remained unchanged at 2.1%.
• The figures are likely to bolster market expectations that eurozone rate hikes are over after ten back-to-back hikes, and may fuel expectations that the ECB will start reversing course around mid-2024. On growth, the survey showed increasing gloom in the outlook though it differed little from the ECB's own staff projections.
• The 2025 GDP growth forecast was cut to 0.9% from 1.1% while 2025 remained unchanged at 1.5%. Unemployment forecasts were barely changed, likely comforting policymakers, as labour market resilience will support consumption and limit the pain caused by the record-high rates.

(Source: Reuters)