"AI boosts European investment" - ECB head predicts slow economic growth until 2028
The President of the European Central Bank, Christine Lagarde, has announced that the eurozone economy is experiencing a structural change, driven by investments in artificial intelligence (AI).
Investments in this sector are being led by large corporations, as well as small and medium-sized enterprises. Spending has been focused primarily on computing capacity, telecommunications networks, and intangible assets such as software and data, rather than on traditional physical capital.
Acknowledging that artificial intelligence could increase productivity over time, Lagarde spoke out against drawing premature conclusions about its impact on what is known as the neutral interest rate.
In an environment characterized by geopolitical upheavals, trade fragmentation and ongoing uncertainty, she emphasized that structural parameters remain undisclosed and were not discussed by the Governing Council at its last meeting.
The European Central Bank is closely monitoring wage growth, services inflation and global trade developments. All of these remain sources of uncertainty for the inflation outlook. This caution is also reflected in the latest projections by central bank staff.
The bank now forecasts eurozone economic growth of 1.4% for 2025, followed by 1.2% in 2026 and 1.4% in 2027 and 2028, with domestic demand playing a larger role compared to the last forecast.
Inflation projections have been revised slightly higher for 2026, reflecting a slower-than-expected decline in services inflation. Headline inflation is expected to average 2.1% in 2025, falling below target in 2026 and 2027, before returning to 2.0% in 2028.
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