MNI BRIEF: EC Sees 2024 EZ Inflation Above ECB's Target

Euro Zone inflation will remain high in coming months, as “broadening price pressures” push the peak out to the end of this year. Inflation will reach 8.5% in 2022, falling to 6.1% next year and 2.6% in 2024, the European Commission said Friday. This is the first time Brussels has added 2024 to the forecast horizon.

Growth, meanwhile, will be a stronger-than-expected 3.2% this year, thanks to the rapid economic rebound following the pandemic, but will fall to just 0.3% next year, as high inflation continues to cut into disposable income and subdue industrial production, the European Commission said in its autumn forecasts released today.

The Commission said the weaker international economy as well as tighter financing conditions would tip both the EU and the euro zone into a recession in Q4, even though post-pandemic economic momentum would lift whole year 2022 growth to 3.2% from the 2.7%, which it forecast in the summer. Economic activity will continue to contract in Q1 2023, the Commission said, but growth would resume in the spring as inflation starts to ease, although “powerful headwinds” would continue to keep activity subdued. Growth would regain traction in 2024, reaching 1.5% in the euro area.