FRANKFURT, May 4 (Reuters) - Euro zone inflation will surge this year on higher energy prices but will then quickly retreat and will be around the 2% target by next year, the European Central Bank's quarterly Survey of Professional Forecasters predicted on Monday.
Euro zone inflation jumped to 3% last month and a further increase is still likely as oil prices remain high, making it increasingly likely that the ECB will need to raise interest rates to prevent longer-term price expectations from rising.
The ECB's survey, reviewed by policymakers in last week's rate-setting meeting, sees inflation averaging 2.7% this year, then falling back to 2.1% by 2027 and 2.0% in 2028.
This will come as underlying price growth, which filters out volatile energy and food prices, is seen averaging 2.2% in both 2026 and 2027, suggesting that survey participants do not expect too many second-round effects from the oil price increase.
The survey is more optimistic than some market indicators, which see inflation above 2% for years to come, even as the central bank is expected to raise interest rates three times this year.
Economic growth will clearly take a hit from the fallout of the war in Iran and the survey sees this year's expansion at just 1.0%, below the 1.2% projected three months ago and the 1.3% considered the long-term growth potential.
Reporting by Balazs Koranyi; Editing by Toby Chopra
Source: Reuters