Banco de España raises inflation and growth forecasts

The Banco de España has increased its economic forecasts, citing rising energy costs and service sector inflation. The central bank, led by José Luis Escrivá, now projects average inflation at 3.9 percent for 2026 and 3.7 percent for 2027, an upward revision driven largely by volatility in energy markets linked to Middle East tensions.

Core inflation is also expected to rise, reaching 3.4 percent in 2026 and 3.5 percent in 2027. These increases are primarily attributed to the services sector, including tourism, hotels, and restaurants. Despite these inflationary pressures, the bank has raised its GDP growth forecasts to 2.6 percent for 2026 and 2.2 percent for 2027, supported by private consumption and employment.

The bank warned of potential risks, including a growing housing deficit that could reach one million units by 2028, and the possibility that higher interest rates and tighter financing could dampen household consumption.