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# Euro-Zone Inflation to Drop Just Below 2% by 2025: ECB Survey Insights

Lead: A recent survey by the European Central Bank (ECB) indicates that euro-zone inflation is expected to decline to 1.9% in 2025, as projections reveal a subdued employment outlook amidst a struggling economy. The survey, conducted from October 1-3, 2024, shows inflation has been adjusted down from a previous forecast of 2% for the same year.

Euro-Zone Inflation Projections

　　According to the ECB's quarterly survey of professional forecasters, consumer prices in the euro area are predicted to rise by 1.9% in 2025. This slight decrease from the earlier forecast of 2% reflects a broader trend of decreasing inflation pressure across the euro zone. These projections further suggest that inflation levels will remain unchanged at 2.4% for 2024 and return to 1.9% in 2026. Long-term inflation expectations for headline and core inflation remain stable at 2% each.

　　The ECB's decision to cut interest rates for the third time in 2024 underscores its attempt to mitigate economic strain and address the inflation decline. In light of these adjustment forecasts, markets are increasingly speculating forthcoming reductions in the deposit rate. The anticipated easing in inflation is seen as a response to both domestic factors and broader economic challenges including weak demand in the manufacturing sector.

Employment Outlook

　　The ECB's survey reveals a subdued employment outlook, with many non-financial companies reporting further moderation in price growth and expectations for gradual easing of wage growth next year. The manufacturing industry is experiencing restructuring efforts driven by decreasing demand and rising wage costs, but these shifts appear to have a muted aggregate effect on the employment landscape as sectors such as services continue to grow and report staffing shortages.

　　Survey respondents voiced limitations on growth expectations, emphasizing a stark contrast to optimism expressed in previous quarters. The predominant sentiment is that the overall subdued growth dynamic is unlikely to change significantly in the short term, with consumer spending recovery now forecasted for 2025.

Key Economic Metrics from the ECB Survey:

Core inflation, excluding food and energy, adjusted to 2.8% for 2024, slightly up from the previous forecast of 2.7%.
Economic growth expectations for 2024 maintain at 0.7%, while the forecast for 2025 has been mildly revised down to 1.2% from 1.3%.
Unemployment is forecasted to stabilize at 6.5% for 2024, with a long-term expectation of 6.4%.

Implications for Monetary Policy

　　The divergence in inflation rates across eurozone countries remains significant, with some nations recovering faster than others. This variability may complicate ECB's monetary policy approach. Recent inflation data indicated a four-month low of 2.2% for March 2025 alongside an unemployment decrease to 6.1%, reinforcing speculation about potential future rate cuts by the ECB.

　　Despite rising pressures in select sectors, the overall stability in core inflation suggests that the ECB may consider additional measures to stimulate the economy without destabilizing the finances of already vulnerable sectors. The recovery trajectory appears reliant on the ongoing assessment of economic data alongside geopolitical uncertainties—particularly trade tensions that could potentially impact inflation and growth rates.

Conclusion

　　As the ECB navigates a complex economic landscape characterized by fluctuating consumer prices and a muted employment outlook, the anticipation of inflation settling near its 2% target by 2025 presents both challenges and opportunities for monetary policy adjustments. Investors in foreign exchange markets should remain vigilant of forthcoming decisions from the ECB, which will respond dynamically to these evolving economic indicators in the euro zone.

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