The economic forecast for the euro zone in 2026 appears to be holding steady despite early-year turbulence, according to a Reuters poll conducted between January 20 and 22. Economists surveyed showed little adjustment to their outlooks on growth, inflation, and interest rate movements in the wake of U.S. political developments and other market uncertainties.
One notable event influencing the geopolitical landscape involved U.S. President Donald Trump’s initial threat to impose additional tariffs on eight European countries opposed to his plans regarding Greenland. However, these tariff threats were quickly withdrawn, mitigating some of the immediate external economic risks facing the euro zone. Despite this decisive move, the speed of these developments outpaced the typical timeframe economists use to recalibrate their forecasts.
Inflation remains near the European Central Bank’s (ECB) target level of 2%, currently recorded at 1.9%. This proximity is expected to provide a steady backdrop for the ECB’s monetary policy decisions. The Reuters poll showed unanimous agreement among 83 economists that the ECB would maintain its current deposit rate of 2% at its upcoming meeting on February 5. Furthermore, 85% of surveyed economists (67 out of 79) anticipate that interest rates will hold steady throughout 2026, a rise in the proportion from previous surveys where the figure ranged between two-thirds to three-quarters.
Insights from the ECB's recent meeting, as released on Thursday, reveal a cautious stance among policymakers with no urgency to alter current policies unless significant economic weakening or an uptick in inflation materializes. Chris Scicluna, head of research at Daiwa Capital Markets Europe, noted that while a rate increase is likely eventually, it is not expected until next year, emphasizing the satisfactory level of current monetary conditions.
Looking ahead, inflation rates are projected to average just below the 2% target for the remainder of 2026, edging closer to the target in the following year. Concerning economic growth, the euro zone expanded by 0.3% in the third quarter of the previous year and is forecasted to maintain a similar pace through the current year. The growth rate is anticipated to modestly accelerate in the latter half of 2026, with estimates suggesting a 1.2% increase for this year and a 1.4% rise in 2027, maintaining consistency with predictions made since August.
Germany, the largest economy in the euro zone, is expected to expand by 1.0% in 2026 and 1.5% in 2027, mirroring earlier forecasts from October. This outlook benefits partly from positive sentiment around planned infrastructure spending. Similarly, France’s growth estimates have slightly adjusted upward to 1.0% in 2026 and 1.1% in 2027 compared to three months prior.
Overall, the economic view for the euro zone remains balanced, with monetary stability expected to accompany moderate growth. Market participants and policymakers appear to be retaining cautious optimism despite geopolitical challenges, with inflation and ECB interest rates central to the bloc's economic trajectory.
A recent Reuters poll reveals that economists have largely maintained their expectations for the euro zone's economic growth, inflation rates, and interest rate policy throughout 2026. Despite political tensions, including U.S. tariff threats and their swift retraction, experts anticipate that inflation will stay close to the European Central Bank's 2% target, with interest rates likely to remain steady for much of the year. Growth forecasts for major economies within the bloc, including Germany and France, also remain stable as the region prepares for gradual economic expansion.
Key Points
- Economists broadly maintain their forecasts for euro zone economic growth, inflation, and monetary policy for 2026.
- Inflation is expected to stay close to the European Central Bank's 2% target, supporting a steady interest rate environment throughout 2026.
- Economic growth in major euro zone economies such as Germany and France is projected to remain moderate but stable over the next two years.
Risks
- Geopolitical risks remain due to potential policy shifts or tensions, exemplified by recent U.S. tariff threats impacting euro zone economies and trade relationships.
- Any significant deviation from the current inflation trajectory—either a marked rise or fall—could prompt unexpected changes in ECB monetary policy, affecting financial markets.
- Unforeseen economic disruptions or weakening activity in the euro zone could lead to revisions in growth forecasts and require prompt policy adjustments.