Eurozone inflation to fall faster than forecast - EU

(Sharecast News) - Eurozone inflation is set to fall faster than initially expected this year, the European Commission forecast on Wednesday. Publishing its latest spring economic forecast, the EC said that Eurozone inflation was likely to fall from 5.4% in 2023 to 2.5% this year and 2.1% in 2025.

In its previous forecast, published in February, the EC saw inflation reaching 2.7% in 2024 and 2.2% next year.

Disinflation would be driven by non-energy goods and food, the report anticipated, while energy inflation continued to edge higher. Services inflation was forecast to decline "only gradually, alongside moderation in wage pressures".

The report noted that growth had been better-than-expected at the start of 2024, supported by the ongoing reduction in inflation.

GDP - which ticked up 0.3% in the first quarter in the Eurozone - was forecast to reach 0.8% in 2024, and 1.0% in the wider bloc.

Eurozone GDP was forecast to reach 1.4% in 2025.

However, the report also flagged increasing uncertainty and downside risks, "mainly stemming from the evolution of Russia's protracted war of aggression against Ukraine and the conflict in the Middle East.

"Moreover, the persistence of inflation in the US may lead to further delays in rate cuts in the US and beyond, resulting in somewhat tighter global financial conditions."

Paolo Gentiloni, commissioner for economy, said: "The EU economy perked up markedly in the first quarter, indicating that we have turned a corner after a very challenging 2023.

"We expect a gradual acceleration in growth over the course of this year and next as private consumption is supported by declining inflation, recovering purchasing power and continued employment growth."