European Central Bank (ECB) investor relations material

Monetary policy decisions and outlook

• Key interest rates remain unchanged, with a commitment to stabilizing inflation at 2% in the medium term amid heightened uncertainty from the Middle East conflict.

• Headline inflation is projected at 2.6% in 2026, 2.0% in 2027, and 2.1% in 2028, with upward revisions due to higher energy prices.

• Economic growth forecasts are revised down to 0.9% in 2026, 1.3% in 2027, and 1.4% in 2028, reflecting global impacts of the conflict.

• Scenario analysis indicates that prolonged energy supply disruptions would push inflation above and growth below baseline projections.

• Policy decisions will remain data-dependent, with no pre-commitment to a specific rate path.

Economic and inflation developments

• Q4 2025 saw 0.2% growth, driven by domestic demand, low unemployment, and increased investment in R&D and digital technologies.

• The external environment is challenging, with the war disrupting commodity markets and weighing on real incomes and confidence.

• Inflation rose to 1.9% in February, with energy prices down year-on-year and core inflation increasing to 2.4%.

• Wage growth is expected to ease in 2026, supporting a return of inflation to target, but near-term inflation will be driven above 2% by energy prices.

Risk assessment and scenario analysis

• Risks to growth are tilted to the downside, especially in the near term, due to the war and volatile global policy environment.

• Upside risks to inflation are present, particularly if energy prices remain elevated or spill over into broader inflation.

• Scenario analysis includes adverse and severe cases, with the severe scenario featuring prolonged high energy prices and greater inflation impact.

• Financial conditions have tightened, with higher market interest rates and cautious lending trends.