Monetary analysts surveyed by the European Central Bank in late August expected inflation to take longer to return to 2%, with the deposit rate staying at 2.50% further into 2027 than they had anticipated just two months earlier.
What makes that shift more interesting is that it was not accompanied by a weaker view of the economy. Median GDP forecasts barely moved from July, while considerably fewer respondents saw the risks to 2026 growth as tilted to the downside.
The result is a less straightforward outlook than higher inflation and higher rates might suggest: analysts had become more concerned about inflation persistence, but less pessimistic about the risks surrounding euro-area growth.
Taken together, the changes point to a more complicated economic picture than a simple worsening of the outlook. Respondents became more concerned about persistent inflation and expected higher interest rates to last for longer, yet at the same time they became less pessimistic about the risks surrounding euro-area growth.
The ECB's September Survey of Monetary Analysts was conducted between 24 and 26 August and received responses from 69 participants. The findings therefore capture expectations formed before the ECB's September policy meeting and should not be treated as views incorporating subsequent developments.
The clearest change between the July and September surveys appears in the expected path of headline inflation.
In July, the median respondent forecast euro-area HICP inflation of 3.0% in the final quarter of 2026, falling to 2.7% in the first quarter of 2027 and then to 2.0% in Q2. From that point, the median remained at 2.0% through the rest of the forecast horizon.
By the September survey, the path had shifted higher. Respondents put median inflation at 3.3% in Q4 2026, 3.0% in Q1 2027 and 2.4% in Q2. It then falls to 2.1% in Q3 before reaching exactly 2.0% in the final quarter of 2027.
| Quarter | July median | September median | Revision |
|---|---|---|---|
| 2026 Q3 | 2.8% | 3.2% | +0.4pp |
| 2026 Q4 | 3.0% | 3.3% | +0.3pp |
| 2027 Q1 | 2.7% | 3.0% | +0.3pp |
| 2027 Q2 | 2.0% | 2.4% | +0.4pp |
| 2027 Q3 | 2.0% | 2.1% | +0.1pp |
| 2027 Q4 | 2.0% | 2.0% | — |
The largest individual revisions are 0.4 percentage points, but the more revealing change is in how long respondents expect inflation to remain above 2%. In July, the median had headline inflation back at exactly 2% by the second quarter of 2027. Two months later, that point had moved to the fourth quarter, effectively pushing the return out by six months.
The adjustment is less pronounced in underlying inflation. Median HICP excluding food and energy stands at 2.5% in Q4 2026, 2.6% in Q1 2027, 2.4% in Q2 and 2.3% in both Q3 and Q4. Compared with July, most of those revisions amount to either no change or just 0.1 percentage point.
That matters because the survey does not point to an equally large upward shift across every measure of inflation. Instead, the stronger change is concentrated in the headline path, with respondents expecting inflation to take longer to return to 2%.
Longer-term expectations also remain stable. The September median for long-run HICP is still 2.0%, while the largest probability allocation in the long-run distribution remains concentrated in the 1.9% to 2.1% range.
The important change is therefore in the journey back towards 2%, rather than in respondents' view of where inflation ultimately settles.
The interest-rate forecasts have moved in a similar direction.
In July, the median respondent expected the ECB deposit facility rate to rise from the then-prevailing 2.25% to 2.50%, remain there through April 2027 and then fall back to 2.25% in June. The median expectation for the third quarter of 2027 was also 2.25%.
By late August, respondents had pushed that anticipated decline further out. The September median remains at 2.50% in June, July and Q3 2027, before moving to 2.25% in the fourth quarter.
That represents a 25-basis-point upward revision to the median forecast for both June and Q3 2027. Yet there is almost no evidence in the survey of a corresponding change in where respondents think rates settle over the longer term: the median long-run deposit-rate expectation remains 2.00%.
The distinction is important because analysts were not signalling a permanently higher policy rate. Their forecasts instead extended the length of time they expected the deposit rate to remain at 2.50% before moving gradually back towards its longer-run level.
The timing of the survey also changes how the figures should be read today. Respondents submitted their answers by 26 August, before the ECB subsequently decided on 10 September to raise the deposit facility rate by 25 basis points from 2.25% to 2.50%, with the new rate taking effect on 16 September.
The useful part of the survey is therefore no longer that respondents anticipated a move to 2.50%. It is what they expected to happen afterwards. Compared with July, their late-August forecasts envisaged a noticeably longer period at that level.
A higher inflation path and a longer spell at 2.50% might have been accompanied by weaker growth forecasts, but that is not what the survey shows.
Respondents forecast quarterly real GDP growth of 0.2% in Q3 2026 and 0.3% in Q4, followed by growth of around 0.3% a quarter through 2027 and most of the subsequent forecast horizon.
Those central forecasts are little changed from July. The more substantial movement appears in the way respondents assessed the risks surrounding them.
In July, 65.2% judged the risks to 2026 growth to be tilted to the downside, while only 4.3% saw upside risks and 30.4% considered them balanced. By September, the downside share had fallen to 43.5%, the proportion seeing balanced risks had risen to 40.6%, and 15.9% now saw the risks as tilted to the upside.
Looking at the two tails together makes the change clearer. In July, the proportion seeing downside risk exceeded the upside share by 60.9 percentage points. By September, that gap had narrowed to 27.6 points.
Finance Gazette's calculation therefore shows a 33.3 percentage-point narrowing in the net downside skew around the 2026 growth outlook between the two survey rounds.
That does not mean respondents suddenly expected rapid euro-area growth. Their central GDP forecasts remain modest. What changed much more clearly was the distribution of risk around those forecasts, with respondents becoming considerably less concentrated on the possibility of growth coming in weaker than expected.
The inflation-risk assessment tells almost the reverse story.
For 2027, the July survey showed 42.0% of respondents judging inflation risks to be tilted to the upside, against 17.4% who saw downside risks. The difference between the two was 24.6 percentage points.
By September, the share seeing upside inflation risks had risen to 52.2%, while the downside share had fallen to 8.7%.
That widened the upside-minus-downside gap to 43.5 percentage points, an increase of 18.9 points from the July survey.
Placed alongside the growth figures, the shift becomes more revealing.
| Risk measure | July | September | Change |
|---|---|---|---|
| Net downside skew, 2026 growth | 60.9pp | 27.6pp | -33.3pp |
| Net upside skew, 2027 inflation | 24.6pp | 43.5pp | +18.9pp |
Respondents were becoming less skewed towards a weaker-than-expected growth outcome at the same time as they became more skewed towards inflation exceeding their central forecasts.
That divergence helps explain why the survey is more interesting than a straightforward account of higher inflation and higher rates. The growth outlook did not weaken in parallel with the inflation outlook. Instead, respondents saw greater inflation risk while becoming noticeably less pessimistic about the downside surrounding economic activity.
The data are consistent with the longer expected period at 2.50%, but they do not establish why respondents changed their rate forecasts. The survey provides aggregate expectations and assessments of risk; it does not demonstrate that higher inflation forecasts directly caused respondents to push out the expected decline in rates.
The strongest restraint on the higher-for-longer interpretation comes from the longer-term figures.
September's median long-run headline inflation forecast remains 2.0%, with the 25th percentile also at 2.0% and the 75th percentile at 2.1%.
The probability distribution tells a similar story. Respondents assigned their largest average probability, 38.4%, to long-run inflation falling within the 1.9% to 2.1% range.
The median long-run deposit-rate forecast is also unchanged at 2.00%.
Those figures make it difficult to characterise the September survey as a fundamental reassessment of the euro area's long-term inflation regime. The more defensible conclusion is narrower: respondents expected the period of elevated headline inflation to last longer than they had in July, and they extended the period during which they expected the deposit rate to remain at 2.50%.
At the same time, their view of the growth risks became materially less negative. The central GDP forecasts barely moved, but the balance around those forecasts did, with the survey showing a much smaller concentration of respondents expecting growth to disappoint.
Because the September responses were collected more than two weeks before the results were published, they should be read as a snapshot of how expectations changed between early July and late August rather than as a real-time measure of analyst thinking after the ECB's September meeting.
Within that limitation, the message from the two surveys is unusually clear. The expected inflation adjustment became longer, the 2.50% rate plateau stretched further into 2027, yet the balance of growth risk improved rather than deteriorated.
It is that divergence, rather than any single inflation or interest-rate forecast, that gives the September survey its most useful financial signal.
