Lisbon, March 25, 2026 (Lusa) - The Bank of Portugal (BdP) projects that inflation will accelerate to 2.8% in 2026, according to the economic bulletin released on Wednesday.

The price index forecast has been revised upwards by 0.7 percentage points (p.p.) for this year and by 0.3 p.p. to 2.3% for 2027, due to increased external pressures.

"The conflict in the Middle East largely explains the upward revisions for inflation in 2026 and 2027", the central bank stated, adding that "dissipation of the energy shock's effect on prices and the anchoring of long-term inflation expectations should contribute to a reduction in inflation to 2% by 2028”.

The government’s 2026 state budget had previously estimated an inflation rate of 2.1% for the current year.

The BdP says that there is a high degree of uncertainty, and that the assumptions underlying this projection exercise "are based on financial market expectations up to 13 March, assuming a relatively limited duration of the conflict in the Middle East, containing effects on household, business confidence and global supply chains”.

The institution warns that "the intensification or prolongation of hostilities would have a more significant impact on both prices and economic activity”.

MES/MYAL // AYLS

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