The European Central Bank’s latest Survey of Professional Forecasters, published Friday, reveals a softer inflation outlook for the euro area this year and next compared to earlier estimates.

Inflation is now expected to average 2% in 2025, a decrease from the 2.2% forecast made just three months ago. Looking further ahead, inflation is projected to ease even more in 2026, settling at 1.8%, below the previous estimate of 2%.

After a sharp decline in inflation over recent years, current figures are close to the ECB’s target rate of 2%. This steady trend influenced the ECB’s decision to keep interest rates steady on Thursday, signaling a cautious approach rather than moving quickly to cut rates again.

Since June 2024, the ECB has already slashed its main interest rate by half—from 4% down to 2%.

The survey also highlights that tariffs will have only a modest dampening effect on inflation in the short term and are expected to be “broadly neutral on balance in 2027 and over the longer-term horizon.”

In the longer run, inflation is anticipated to hover near the ECB’s 2% goal, maintaining price stability across the eurozone.

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