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ECB: Sep '24 Projections: Headline Inflation Still Seen At 2% By Next Year (1/2)

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Headline inflation is still expected to return to the 2% target in Q4 2025, according to the ECB’s September projections. A number of speakers/sources had noted the importance of inflation returning to target next year, with a slippage into 2026 likely to damage the ECB’s credibility, and potentially hamper easing plans.

  • Although core inflation projections were revised higher in 2024 and 2025, it is still seen back at 2% in 2026. The ECB’s report notes that “NEIG [non-energy industrial goods] inflation is expected to rise somewhat in late 2024”, while services is expected to remain around 4% “for the remainder of the year”.
  • This updated trajectory in core inflation supports the case for non-sequential cuts this calendar year (i.e. a hold in October, cut in December) , but keeps the door open to a more aggressive pace of easing in 2025 should the activity data support such a notion.

 

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Headline inflation is still expected to return to the 2% target in Q4 2025, according to the ECB’s September projections. A number of speakers/sources had noted the importance of inflation returning to target next year, with a slippage into 2026 likely to damage the ECB’s credibility, and potentially hamper easing plans.

  • Although core inflation projections were revised higher in 2024 and 2025, it is still seen back at 2% in 2026. The ECB’s report notes that “NEIG [non-energy industrial goods] inflation is expected to rise somewhat in late 2024”, while services is expected to remain around 4% “for the remainder of the year”.
  • This updated trajectory in core inflation supports the case for non-sequential cuts this calendar year (i.e. a hold in October, cut in December) , but keeps the door open to a more aggressive pace of easing in 2025 should the activity data support such a notion.