The euro area faces a prolonged period of above‑target inflation and is unlikely to return to the European Central Bank’s 2% objective until 2028, Mateusz Szczurek, the head of the IMF’s European department, said. While policymakers have so far contained the most dangerous manifestations of price pressure, it is premature to declare the region’s inflation problem solved, he warned.

The fund has flagged particular concern about Central and Southeastern Europe, where inflation is expected to stay above the ECB’s target for even longer. The primary risk remains costly energy, which is pushing up input costs across industry and services. Against this backdrop, the IMF sees only modest growth: excluding Ireland, eurozone GDP is forecast to pick up just 1.2% in 2026 and to slow slightly to about 1.1% in 2027.

The IMF’s latest projections put euro area inflation at roughly 3% in 2026. The fund also notes that the European regulator has revised its outlook higher. Now inflation is expected to average 2.5% next year, up from the previous estimate of 2.3%. Such persistent inflationary pressure, coupled with sluggish economic growth, narrows policy space for both national governments and the central bank.