Post by Indosuez Wealth Management

Europe: Forecasting in the Fog Our recent visit to Frankfurt sharpened our outlook for Germany and the Euro Area, but optimism is limited. While German stimulus provides some support, escalating Middle East tensions and a new energy shock weigh on the region. We also explain how this energy shock differs from 2022.   Key points: ▪️ March data shows fragile growth and falling consumer confidence. We’ve revised our Euro Area GDP growth forecast down to 0.9% for 2026 and 1% for 2027. ▪️ Inflation is being driven by energy prices, but core inflation remains stable. We now expect average inflation at 3% in 2026 and 2.6% in 2027. ▪️ With the ECB’s next meeting on 30 April, investors are pricing in rate hikes. However, today’s backdrop is less overheated than in 2022, and the ECB may choose to ‘look through’ the current shock. Our view: The clock is ticking but the ECB could still achieve its 2% inflation goal without further hikes. The coming weeks will be critical. For deeper insights, we invite you to watch our accompanying video. https://lnkd.in/e6UAteae   Alexandre Drabowicz, CAIA Hans Bevers Benedicte Kukla #EuroArea #ECB #EconomicOutlook #Inflation #PrivateBanking