Pandemic-era fiscal support measures still push inflation higher – ECB

Support measures taken by European governments in response to the pandemic and other recent crises are still fueling inflation in the region, according to the European Central Bank's (ECB) bulletin.

The regulator's experts forecast that increased spending as part of fiscal programs will push up prices in the eurozone by 0.7 percentage points this year. The measures would also cause inflation to accelerate further by 0.4 percentage point and 0.3 percentage point in 2026 and 2027, respectively.

According to the regulator's March forecasts, inflation was projected to average at 2.3% in 2025, then fall to 1.9% in 2026, and reach 2% in 2027. Without the additional spending during the crises of the past five years, it would have been below the 2% target in each of those periods, the ECB officials said.

The analysis also provides an examination of the influence the support measures had on the eurozone's economic growth. As estimated by the ECB, the subsidy programs provided substantial support to the region's real GDP growth in 2020–2022.