According to the ECB’s latest forecast, real GDP is projected to grow by ca 4½% in both 2021 and 2022, and by 2% in 2023. Headline inflation is rising this year due to temporary factors. However, the core i.e.
underlying inflation (excluding energy and food) is expected to increase only slightly from 1.1% in 2021 to 1.4% in 2023, as euro area domestic cost pressures are projected to recover gradually but remain muted overall. Importantly, the medium-term inflation outlook is still below the ECB’s 2% symmetric inflation target.