European Central Bank Raises 2026 Inflation Forecast to 2.6% Due to Energy Crisis
The ECB revised its inflation projections upward for 2026, citing higher energy prices from the Middle East conflict. The central bank now expects eurozone inflation to average 2.6% this year, well above its 2% target.
Inflation Projections Revised Higher
The March ECB staff projections see headline inflation averaging 2.6% in 2026, 2.0% in 2027 and 2.1% in 2028. Inflation has been revised up compared with the December projections, especially for 2026. Headline inflation rose to 2.6% in March from 1.9% in February due to an increase in energy inflation. Core inflation, which excludes energy and food, eased slightly to 2.3%.
Energy Crisis Impact
However, the war in the Middle East has brought renewed uncertainty and the economic outlook is clouded again. Disruptions to shipping through the Strait of Hormuz, a key route for global oil and liquefied natural gas (LNG) trade, together with attacks on energy infrastructure, have led to significant volatility in global energy markets and have pushed up oil and gas prices.
Growth Outlook Weakened
The baseline projections foresee annual real GDP growth of 0.9% in 2026, 1.3% in 2027 and 1.4% in 2028. Compared with the December 2025 projections, GDP growth has been revised down by 0.3 percentage points for 2026 and by 0.1 percentage points for 2027, on account of the escalating war in the Middle East.
Policy Stance Remains Data-Dependent
We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on the inflation outlook and the risks surrounding it, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path.