Euro zone faces big growth hit even if Iran war quickly resolved, IMF says
The fund said inflation will rise to 2.6% and the European Central Bank may need to lift rates by 50 basis points in 2026.
- On Tuesday, the International Monetary Fund reported that Euro zone growth will slow and inflation will surge this year, forcing the European Central Bank to lift interest rates.
- Economic disruptions caused by the Iran war, coupled with lingering effects from Russia's invasion of Ukraine, are dragging on manufacturing and increasing energy costs for the region.
- According to the World Economic Outlook, growth is seen slowing to 1.1% this year, while inflation will jump to 2.6% in 2026 from 2.1% last year.
- Market bets fully price in a rate hike soon, as the ECB's 2% deposit rate is likely to rise by 50 basis points over 2026 in response to inflation.
- Despite greater IMF optimism than the ECB's 0.9% projection, the fund warned that "adverse" and "severe" scenarios could produce larger growth hits and higher inflation across the world.
19 Articles
19 Articles
IMF cuts eurozone full-year growth forecast to 1.1%
The International Monetary Fund on Tuesday cut its growth forecast for the eurozone to 1.1 percent this year due to the "negative impact" of the war in the Middle East. Outside the eurozone, Britain's economy is now expected to expand by 0.8 percent this year, a sharp reduction from the 1.3 percent growth the IMF forecast at the beginning of the year. mpa/js/rl
Euro zone faces big growth hit even if Iran war resolved
Euro zone growth will slow this year and inflation surge, forcing the European Central Bank to lift interest rates, even if the economic disruptions caused by the Iran war fade by mid-year, the International Monetary Fund said today.
The International Monetary Fund said it expected growth of 1.1% for the EU's 21-country euro area in 2026, compared to 1.3% in January.
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