The ECB Survey of Professional Forecasters - Fourth quarter of 2026

Headline and core inflation expectations have been revised upward, owing primarily to renewed energy price pressures.^[1]

The headline inflation expectations of respondents to the Survey of Professional Forecasters (SPF) have been revised upwards by 0.3 percentage points to 3.0% for 2026 and by 0.4 percentage points to 2.6% for 2027, but remain unchanged at 2.0% for 2028. These upward revisions can mainly be attributed to higher and more persistent energy commodity prices, as well as resulting additional indirect effects.

SPF expectations for core inflation remain unchanged at 2.4% for 2026, and have been revised upwards by 0.2 percentage points to 2.5% for 2027 and by 0.1 percentage points to 2.2% for 2028.

Longer-term headline inflation expectations remain anchored at 2.0%, and slightly more tightly than before.

Forecasters expect the energy shock to be more prolonged than previously anticipated and to result in somewhat more indirect effects on inflation (primarily in 2027). They have incorporated indirect effects of around 0.3 percentage points in 2026 and 2027, but continue to expect limited second-round effects (Box 1).

The near-term growth outlook has been revised up, mainly reflecting the mechanical effect of better than anticipated recent data releases. Growth is now expected to stand at 1.0% in 2026 and to pick up to 1.3% in 2027, 2028 and in the longer term.

Risks to inflation are tilted to the upside between 2026 and 2028 and broadly balanced thereafter, while risks to growth are mainly on the downside. Risks stem primarily from the current geopolitical tensions and possible disruptions to energy supply. The qualitative risk balance to point inflation expectations has increased for 2026 to 2028 but remains balanced for the longer term.^[2]

The unemployment rate is expected to ease moderately and gradually from its current level of around 6.4% in 2026 to 6.1% in the longer term. Nominal wage growth has been revised slightly upwards for 2026 and 2027, but is still expected to decline gradually to 2.8% in 2028 and 2.7% in the longer term.

In this round, as in the previous round, SPF respondents were asked special questions related to the possible indirect and second-round inflationary effects of the energy shocks linked to the war in the Middle East. First, for each calendar year from 2026 to 2028 and for 2031, they were asked to indicate the indirect and second-round effects they had incorporated into their baseline expectations for headline inflation.^[3] Second, with regard to their wage forecasts, they were asked to assess the relevance of a number of factors that might cause the Middle East shock to have a different impact on wages compared with the 2022 shock.^[4] Third, they were asked to provide an estimate of how long the Middle East conflict will last, and of how long the associated disruptions to energy prices and supply chains will persist.^[5] This last question was also asked in the SPF round for the second quarter of 2026, following the outbreak of the Middle East conflict.

SPF respondents have revised their estimate for expected indirect and second-round effects upwards for 2027, as well as for 2028, albeit only slightly. There is little change in the expected effects for 2026. Forecasters see these effects as being mainly concentrated in 2026 and 2027, and expect them to largely disappear by 2028 (Chart A, panel a). The indirect effects on inflation of the war in the Middle East are expected to amount to around 0.25 percentage points in 2026 and 0.3 percentage points in 2027, with minor effects persisting into 2028. For 2027 this represents an upward revision of 0.2 percentage points. These indirect effects are expected mainly for non-energy industrial goods, food and transport services inflation. The upward revisions compared with the previous round primarily reflect the shift in the oil price assumptions embedded in the SPF expectations. The expected second-round effects have also been revised up for 2027, but remain fairly limited, amounting to around 0.1 percentage points. Based on their qualitative responses, respondents consider that the indirect effects observed so far have not been stronger than originally anticipated. The upward revision over the forecast horizon stems instead from an expectation that the conflict will be more prolonged than previously expected. Having previously expected the Middle East conflict to last between one and three months, a large majority of the panellists now expect it to last between ten and 12 months (from the outbreak in late February 2026). Similarly, while supply disruptions with potential inflationary effects were previously expected to persist for between one and 12 months, they are now expected to last for between ten and 24 months. This reflects both the conflict’s prolonged duration to date and a slight increase in how much longer panellists expect it (and its effects) to continue.

Chart A

Estimated indirect and second-round effects of the war in the Middle East on headline inflation and responses to the special question on wages

a) Effects on headline inflation	b) Relevance of selected factors for potential wage effects

The indirect and second-round effects reported by SPF respondents are largely in line with the revisions to their HICPX forecasts since the start of the Middle East conflict. Table A shows the changes in HICPX and compensation per employee forecasts in the SPF between the rounds for the first and fourth quarters of 2026 (January and October 2026, respectively), as well as the revisions between the December 2025 and September 2026 Macroeconomic Projections Exercises (MPEs). Between 2026 and 2028, the revision in the SPF HICPX forecasts amounted to 1.0 percentage point, compared with the estimated combined indirect and second-round effects of the conflict of 0.8 percentage points. The revision in the HICPX forecasts up to the September 2026 MPE, amounting to 1.2 percentage points, was slightly higher than for the SPF. This was also the case for revisions to the compensation per employee forecasts, which increased by 0.5 percentage points in the SPF and by 0.7 percentage points in the MPE.

The duration of the energy shock appears to be the most relevant factor behind wage developments after the recent shock, compared with the shock following the Ukraine invasion. This is more pronounced in the current round than in the previous one. The size of the energy shock and the labour market situation also continue to be very relevant factors. The duration of the energy shock is considered very relevant by 70% of respondents, and at least somewhat relevant by almost 100% (Chart A, panel b). The size of the shock and the labour market situation are deemed very relevant by around 50%, and at least somewhat relevant by 90%. While a slightly smaller share of respondents cited the size of the shock as being very relevant, the same share consider it at least somewhat relevant. The memory of high inflation or scarring effects and the growth outlook are again not considered very relevant, although many respondents still consider that these factors play some role. As in the previous quarter, AI is considered the least important of the listed factors.

Table A

Revisions to SPF and ECB/Eurosystem staff macroeconomic projections since the start of the Middle East conflict, and reported SPF indirect and second-round effects

(percentage points)

		2026	2027	2028
HICPX	MPE	0.3	0.7	0.3
	SPF	0.4	0.5	0.1
Compensation per employee	MPE	0.0	0.4	0.3
	SPF	0.2	0.2	0.1
Indirect effects	SPF	0.3	0.3	0.0
Second-round effects	SPF	0.1	0.1	0.0
Combined effects	SPF	0.3	0.4	0.1

Headline and core inflation expectations have been revised upwards, owing primarily to renewed energy price pressures.

The headline inflation expectations of respondents to the Survey of Professional Forecasters (SPF) have been revised upwards by 0.3 percentage points to 3.0% for 2026 and by 0.4 percentage points to 2.6% for 2027, but remain unchanged at 2.0% for 2028 and in the longer term.

These upward revisions can mainly be attributed to higher and more persistent energy commodity prices, as well as the resulting additional indirect effects.

Compared with the September 2026 ECB staff macroeconomic projections, the headline inflation expectations in this SPF round are the same for 2026, slightly higher for 2027 and marginally lower for 2028 (Chart 1).

Chart 1

Inflation expectations: HICP inflation

(annual percentage changes)

SPF expectations for core inflation are unchanged at 2.4% for 2026, and have been revised upwards by 0.2 percentage points to 2.5% for 2027 and by 0.1 percentage points to 2.2% for 2028. They remain unchanged at 2.0% over the longer term.

Based on respondents’ comments, the upward revisions appear to stem primarily from indirect effects resulting from the pass-through of the higher than previously expected energy price increases, rather than from a stronger degree of pass-through, particularly to non-energy industrial goods. Pass-through to services is expected to be contained, affecting mainly transport services.

The upward revisions have brought the SPF expectations for 2027 and 2028 closer to the September 2026 ECB staff macroeconomic projections. However, the SPF expectations remain below the projections by 0.1 percentage points for each of the calendar years between 2026 and 2028 (Chart 2).

Chart 2

Inflation expectations: HICP excluding energy and food

(annual percentage changes)

Oil and energy were again by far the most frequently cited main factors in respondents’ qualitative remarks on their baseline inflation outlook and the risks around it (Chart 3). In this round, some respondents also stressed geopolitical tensions, while fewer referred to labour markets and wages.

Chart 3

Main factors in the qualitative comments on the baseline inflation outlook, revisions and risks

(percentage of total)

With higher realisations and one-year ahead expectations, but unchanged expectations thereafter, the downward slope of the term structures for both headline and core inflation has become more pronounced (Chart 4).

Chart 4

Term structure of inflation expectations

a) HICP	b) HICPX
(annual percentage changes)	(annual percentage changes)

Longer-term inflation expectations remain firmly anchored at 2.0%.

The distribution of individual point forecasts is marginally more tightly concentrated around the target than in the previous round. Around 68% of respondents expect an inflation rate of exactly 2.0% in the long run, up slightly from about 65% in the previous round (Chart 5). The share reporting longer-term inflation expectations outside the range 1.9-2.1% is fairly small at 16%.

Chart 5

Histogram of longer-term inflation point expectations

(percent)

Near-term GDP growth expectations have been revised up, mainly reflecting the mechanical effect of recent data.

Growth expectations are 1.0% for 2026 and 1.3% for 2027, 2028 and the longer term. The expectations for 2026 and 2027 are stronger than previously anticipated. The upward revisions mainly stem from stronger than expected first-half growth data and are supported by resilient business sentiment and spending on AI.

SPF growth expectations are slightly higher than the ECB staff macroeconomic projections for 2026, but lower for 2027 and 2028 (Chart 6, panel a).

The quarterly profile for the coming quarters remains broadly stable.

Following a stronger than previously expected growth outturn for the second quarter of 2026, expectations stand at 0.2% and 0.3% for the third and fourth quarters of 2026, and at 0.3% and 0.4% for the first and second quarters of 2027.

The quarterly SPF growth expectations are 0.1 percentage points lower than the latest ECB staff projections for the third and fourth quarters of 2026, and the same, on average, for the first two quarters of 2027 (Chart 6, panel b).

Longer-term growth expectations (referring to 2031) have been revised up slightly by 0.1 percentage points to 1.3%.

Chart 6

Expectations for real GDP growth

a) Calendar year horizons	b) Quarterly profile
(annual percentage changes)	(annual percentage changes)

Unemployment rate expectations have been revised up slightly for 2026, remaining broadly unrevised thereafter

The expected trajectory of the unemployment rate remains one of gradual decline, from 6.4% in 2026 to 6.1% in the longer term (Chart 7, panel a).

Compared with the previous round, the expected profile of the unemployment rate has been revised slightly up for 2026, reflecting a 0.1 percentage point upward revision of past data, and remains broadly unrevised thereafter.

SPF unemployment rate expectations remain above the September 2026 ECB staff macroeconomic projections at all horizons, by 0.2 percentage points for 2026 and 2027 and by 0.3 percentage points for 2028.

Respondents expect a less negative output gap that narrows faster.

The estimated output gap has been revised up by around 0.2 percentage points for 2026 to 2028 and is now expected to close as early as 2028 (Chart 7, panel b).

Chart 7

Expectations for the unemployment rate and the output gap

a) Unemployment rate	b) Output gap
(percentages of the labour force)	(percent)

Risks to the inflation outlook are tilted more to the upside, while risks to the growth outlook are largely to the downside.

The balance of inflation risks is considered to be tilted to the upside for the calendar years 2026 to 2028, but balanced for the longer term (Chart 8, panel a). This result is consistent across the qualitative risk assessment reported by SPF panellists and the quantitative assessment based on reported distributions. The upward tilt stems primarily from the duration and severity of energy market disruptions. The risks include higher than expected indirect effects, owing to the materialisation of energy market risks and/or stronger than expected pass-through. The qualitative risk balance to point inflation expectations has increased for 2026 to 2028, but remains balanced for the longer term.^[6]

GDP risks are largely considered to be tilted to the downside across all horizons (Chart 8, panel b). More prolonged geopolitical tensions and a longer-lasting energy shock were the main risks cited.

Uncertainty, as measured by the standard deviation of the aggregated probability distributions, has increased slightly for the one-year and two-years ahead horizons, but has decreased slightly for the longer-term horizon for each variable (inflation, GDP growth and the unemployment rate). It now stands somewhat above the pre-Middle East war levels for inflation and the unemployment rate.

Chart 8

Qualitative and quantitative risk assessments

a) HICP inflation	b) Real GDP growth
(annual percentage changes)	(annual percentage changes)

Expectations for the ECB’s deposit facility rate (DFR) have shifted upwards compared with the previous round (Chart 9).

For the fourth quarter of 2026 the modal expectation for the DFR remains at 2.50%, as reported by 48% of respondents. However, a sizeable share (43%) expect interest rates to increase to 2.75%. Thereafter, the modal expectation remains at 2.75% until 2028, when it returns to 2.50%. For the longer term, the modal expectation stands at 2.25% according to 38% of respondents, while a significant share of respondents expect either 2.50% (31%) or 2.00% (25%).

Chart 9

Expectations for the ECB’s deposit facility rate (DFR)

a) ECB DFR policy rate (average)

(percent)

b) DFR expectations

(percentage of respondents)

Nominal wage growth expectations have been revised slightly upwards for 2026 and 2027, remain unchanged for 2028 and have been revised downwards for the longer term (Chart 10, panel a).

Growth in compensation per employee is expected to average 3.3% in 2026, 3.1% in 2027 and 2.8% in 2028. For 2026 and 2027, there have been small upward revisions of 0.1 percentage points. Longer-term expectations have been revised down by 0.2 percentage points to 2.7%.

While these expectations are in line with the September 2026 ECB staff macroeconomic projections for 2026, they are lower for 2027 and 2028.

Respondents continue to expect the euro to gradually appreciate against the US dollar (USD), although the profile up to 2028 has been revised down from the previous round (Chart 10, panel b).

US dollar-denominated oil prices have been revised upwards, reflecting higher oil prices and expectations of a longer conflict and a more persistent impact (Chart 10, panel c). The expected level is somewhat above the September 2026 ECB staff macroeconomic projections until 2028.

Chart 10

Expectations for other variables

a) Compensation per employee	b) EUR/USD exchange rate	c) Oil price
(annual percentage change)	(USD per euro)	(USD per barrel)

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