ECB survey sees inflation back near target by 2025

FRANKFURT (Reuters) - Euro zone inflation will have almost fallen back to the European Central Bank's 2% target in 2025, but economic growth will remain weak and at below 1% through next year, the ECB's quarterly Survey of Professional Forecasters showed on Friday.

The ECB left interest rates unchanged on Thursday after the steepest set of hikes on record, arguing that inflation was finally back on track towards 2%, even if high energy costs continued to pose an upside risk.

Friday's survey, a key input in the bank's policy deliberation, confirmed this outlook, predicting relatively slow but persistent disinflation over the coming two years.

The survey sees consumer price growth at 2.7% next year, the same figure predicted three months ago but well below the ECB's own 3.2% expectation. The 2025 figures was meanwhile lowered to 2.1% from 2.2% and the longer-term forecast, defined as 2028, remained unchanged at 2.1%.

The figures are likely to bolster market expectations that euro zone rate hikes are over after ten back-to-back hikes, and may fuel expectations that the ECB will start reversing course around mid-2024.

On growth, the survey showed increasing gloom in the outlook though it differed little from the ECB's own staff projections.

The 2025 GDP growth forecast was cut to 0.9% from 1.1% while 2025 remained unchanged at 1.5%.

Unemployment forecasts were barely changed, likely comforting policymakers, as labour market resilience will support consumption and limit the pain caused by the record high rates.

(Reporting by Balazs Koranyi; editing by John Stonestreet)

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