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] Theheadline inflation expectationsof 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 forcore inflationremain 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 expectationsremain 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-termgrowthoutlook 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 inflationare tilted to the upside between 2026 and 2028 and broadly balanced thereafter, whilerisks to growthare 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] Theunemployment rateis 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 growthhas 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. Results of the SPF in comparison with ECB staff macroeconomic projections (annual percentage changes, unless otherwise indicated) ECB staff macroeconomic projections (September 2026) ECB staff macroeconomic projections (September 2026) ECB staff macroeconomic projections (September 2026) ECB staff macroeconomic projections (September 2026) ECB staff macroeconomic projections (September 2026) Notes: Longer-term expectations refer to 2031. The unemployment rate is expressed as a percentage of the labour force. 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. Estimated indirect and second-round effects of the war in the Middle East on headline inflation and responses to the special question on wages b) Relevance of selected factors for potential wage effects Notes: In panel a), while estimated effects were also requested for 2031, they were reported as zero and are not therefore depicted in the chart. Panel b) shows the reported relevance of six factors. The factors are, in descending order of the portion indicating “very relevant”: (i) size/magnitude of the energy shock; (ii) length/duration of the energy shock; (iii) labour market situation; (iv) growth outlook; (v) memory of high inflation/scarring effect; and (vi) AI. 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 Ashows 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 ver