LIST OF ABBREVIATIONS 7

LIST OF FIGURES 8

LIST OF TABLES 8

EXECUTIVE SUMMARY 9

INTRODUCTION 10

THE ECONOMIC SCENARIO AND THE MONETARY POLICY STANCE 11

2.1. A Surprisingly Stable Scenario 11

2.2. Successful Disinflation in the Euro Area 12

2.3. External Risks Did Not Materialize in 2025 12

2.3.1. The Shock That Did Not Arrive: Exports to the United States 14

2.3.2. The Shock That Did Arrive: Imports from China 16

2.3.3. China’s Reorientation: Exporting Elsewhere 17

2.3.4. Bottom Line: Inflation Surprises, Trade Uncertainty, and the China Channel 17

2.4. The Inflation Outlook 18

2.4.1 China 18

2.4.2. United States 22

INFLATION DISPERSION IN THE EURO AREA 23

3.1. Inflation Dispersion 25

3.2. Core-Periphery Inflation Differentials 27

3.3. Supply Shocks and Inflation Dispersion 28

A MULTI-AGENT LLM BASED APPROACH TO ECB COMMUNICATION ANALYSIS 32

4.1. Results 32

4.1.1. The Financing Conditions Impasse: Hawks versus Doves 34

4.1.2. Oversight Gap: Selective Attention to Inflation Heterogeneity 35

4.1.3. Communication Consistency: Peaks and Troughs 37

4.1.4. External Anchors and Policy Divergence 38

4.1.5. Balance Sheet Normalisation 38

CONCLUSION 39

REFERENCES 40

ANNEX 43