ECB Sees Euro Zone Inflation Above 3% Through 2026, Backing Measured Rate Response
Updated
Updated · Reuters · Jun 19
ECB Sees Euro Zone Inflation Above 3% Through 2026, Backing Measured Rate Response
3 articles · Updated · Reuters · Jun 19
Summary
Philip Lane said euro zone inflation should stay above 3% for the rest of 2026, arguing the ECB faces a mid-sized shock that warrants a measured policy response rather than emergency-style tightening.
Pipeline cost increases have already done enough damage that inflation will remain above the ECB’s 2% target into next year even if Middle East tensions ease, with second-round effects likely to lift wages in 2027.
Markets now price in one to two more increases from the ECB’s 2.25% deposit rate, with the next hike fully priced by October and another move potentially pushing rates to the top of the bank’s 1.75%-2.50% neutral range.
Lane said high energy costs will weigh on growth, but household savings, AI- and defence-led investment, and a liquid, profitable financial system should keep the economy near potential.