ECB economic bulletin: Recent inflation data have come in broadly as expected

ECB staff see headline inflation averaging 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026, as in the June projections. 

Inflation is expected to rise again in the latter part of this year, partly because previous sharp falls in energy prices will drop out of the annual rates. 

For core inflation, the projections for 2024 and 2025 have been revised up slightly, as services inflation has been higher than expected. 

ECB staff continue to expect a rapid decline in core inflation, from 2.9% this year to 2.3% in 2025 and 2.0% in 2026.

Domestic inflation remains high as wages are still rising at an elevated pace.

However, labor cost pressures are moderating, and profits are partially buffering the impact of higher wages on inflation.

ECB staff project that the economy will grow by 0.8% in 2024, rising to 1.3% in 2025 and 1.5% in 2026. 

This is a slight downward revision compared with the June projections, mainly owing to a weaker contribution from domestic demand over the next few quarters.

The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. 

It will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim. 

The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction. 

The Governing Council is not pre-committing to a particular rate path