ECB warns inflation above 2% target through 2027 amid energy shock and heat waves

The European Central Bank (ECB) says inflation in the euro area is likely to stay above its 2% goal until at least the first half of 2027. The bank cites persistent energy price pressures stemming from the Middle‑East conflict and the indirect effects of extreme weather, such as the current heat wave, which are expected to raise food prices and broaden price‑rise risks. Oxford Economics highlights that rising energy costs could keep headline inflation above target, while the ECB keeps open the option of a rate hike in September. A New York Fed consumer‑expectations survey shows a slight dip in one‑year inflation expectations to 3.6% in July, but longer‑term expectations remain unchanged. Economist Leonardo Becchetti explains how heat‑related supply disruptions can push up the cost of groceries, adding to the overall inflationary pressure on households.