EU cuts Euro-Area GDP forecast, sees 7.6% inflation, draft shows – Bloomberg

“The euro area’s rebound from the pandemic will be weaker than anticipated while inflation will be faster because of Russia’s war in Ukraine, according to draft projections by the European Commission,” per Bloomberg.

More details

With surging prices crimping demand and the danger of winter energy shortages draining confidence, gross domestic product is likely to advance 2.6% this year and 1.4% in 2023 -- down from May predictions for gains of 2.7% and 2.3%, according to new forecasts from the European Union executive arm seen by Bloomberg. 

Inflation, already at a record that’s more than four times the European Central Bank’s 2% target, is now seen at 7.6% in 2022 and 4% next year, up from 6.1% and 2.7%.

The predictions may still change before they are officially published Thursday. 

Some economists see a recession in Europe as inevitable, even without the Kremlin halting energy supplies, with inflation also likely to remain elevated. That’s complicating the task of the ECB, which is only just embarking on a first interest-rate increase in more than a decade.

FX implications

EUR/USD remains pressured around the lowest levels since December 2002 by the press time. The major currency pair was last seen around 1.0057.