ECB lifts growth, inflation projections

FRANKFURT, Sept 10 (Reuters) - ‌The European ​Central ​Bank raised some of its growth projections on Thursday and also lifted ‌its inflation outlook, suggesting that it expects ⁠a war-induced energy shock to dissipate only slowly.

Inflation soared ‌past 3% this summer ‌and is likely to stay high for some time, raising the risk that expensive energy ​will eventually lift the cost of other goods and services, forcing the ECB ⁠to tighten even further after two rate hikes this year.

Inflation is ​now seen averaging 2.5% next year, above the 2.3% seen in June while ​underlying inflation is seen ‌at 2.6% in 2027, above the 2.5% forecast earlier.

But a relatively soft ⁠labour market limits the risk that workers will demand compensation for higher prices, setting off a ⁠hard-to-beat wage-price spiral.

The economy nevertheless appears more resilient to the ​energy price shock than many had predicted. Consumption, investment and industrial output are holding up well, indicating that ‌firms and households are quickly adapting to a rapidly shifting environment.

The ‌following are the ECB's baseline projections for inflation ⁠and GDP growth. ‌Its previous projections ​from June are in brackets.

2026 2027 2008

GDP Growth: 0.9% (0.8%) 1.4% (1.2%) 1.5% (1.5%)

Inflation: 3.0% (3.0%) 2.5% (2.3%) 2.1% (2.0%)

Core inflation 2.5% (2.5%) 2.6% (2.5%) 2.3% (2.2%)

(Reporting by Balazs Koranyi; Editing by Catherine ‌Evans)

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