FRANKFURT (Reuters) - The European Central Bank raised its inflation projections for the euro zone on Thursday and said price growth would remain above its 2% target throughout a projection horizon that now extends to 2025.
The ECB has persistently underestimated inflation over the past two years, and the bank has raised interest rates at four successive meetings to tame unexpectedly persistent price pressures.
The bank now sees inflation in the 19-country currency bloc at 6.3% next year, compared with expectations for 5.5% made in September. Its 2024 forecast was raised to 3.4% from 2.3% while, in its first estimate for 2025, the ECB sees inflation then at 2.3%
Initially driven by post-COVID supply chain bottlenecks, inflation has been surging on sky-high energy prices, but food and services costs are now becoming increasingly prominent, making price growth relatively broad.
Economic growth will meanwhile suffer badly next year as a result of Russia's war in Ukraine, particularly the impact of high energy prices.
The ECB now sees GDP growth at 0.5% next year compared with 0.9% forecast in September, while in 2024, it is projected at an unchanged 1.9%. In 2025, the ECB sees growth at 1.8%.
The following are the ECB's quarterly growth and inflation projections through 2025. Figures in brackets are previous forecasts from September.
The ECB targets inflation at 2%.
2022 2023 2024 2025
GDP growth 3.4% (3.1%) 0.5% (0.9%) 1.9% (1.9%) 1.8%
Inflation 8.4% (8.1%) 6.3% (5.5%) 3.4% (2.3%) 2.3%