Compared with the December forecast round, the outlook for HICP inflation has been revised downwards across the projection horizon. This downward revision reflects, in particular, the more subdued near-term growth outlook, which is delaying the adjustment of inflation to our aim.
Also for inflation, supportive factors continue to be in place that will lift inflation above this year’s muted levels in the more medium term. Labour cost pressures have strengthened and broadened amid high levels of capacity utilisation and tightening labour markets. Together with the economic expansion, these forces are expected to trickle through to wage growth and support underlying inflation.