Eurozone inflation keeps upside
Headline inflation in the eurozone is now expected to average 2.6% in 2026 while growth is forecast at just 0.9% — markets are pricing in three ECB rate hikes this year. Germany’s leading economic institutes have sharply cut 2026–27 growth forecasts and raised inflation estimates, underscoring downside risk for Europe’s largest economy. (wealthbriefing.com, marketscreener.com, reuters.com)
Traders have moved to fully price three quarter-point ECB rate hikes this year, shifting futures and swap curves toward roughly +75 basis points of tightening. (bloomberg.com)) Barclays and J.P. Morgan explicitly penciled in 25bp moves in April, June and July that would lift the ECB’s deposit rate toward about 2.75% by year-end. (cnbc.com)) French and German 10‑year yields climbed to multi‑year highs this week, with the euro‑area 10‑year government bond yield around 3.5% on March 30, 2026. (cnbc.com)) ECB governing‑council member Primož Dolenc warned on April 1 in Ljubljana that the euro area “may already be on the adverse path” outlined by the bank, flagging a risk of faster entrenchment of inflation. (money.usnews.com)) The ECB’s March staff projections include alternative scenarios for the Iran‑driven energy shock, and the bank’s severe scenario shows inflation could peak at about 6.3% in Q1 2027. (ecb.europa.eu)) Germany’s joint spring forecast — produced by ifo together with DIW Berlin, the Kiel Institute (IfW), IWH Halle and RWI Essen — cut 2026 GDP growth to 0.6% (from 1.3%) and trimmed 2027 to 0.9% (from 1.4%), while pushing up inflation projections. (ifo.de)) The institutes also forecast a public‑deficit rise to about 3.7% of GDP in 2026, gross debt near 67.2% of GDP, and an unemployment rate around 6.4% in 2026 as the energy shock weighs on production and employment. (ifo.de))
