The European economy’s robust performance over the past year is set to continue in 2018 and 2019 with growth of 2.3% and 2.0% respectively in both the euro area and EU, according to the interim economic forecast issued on 7 February. Growth rates for the euro area and the EU beat expectations last year as the transition from economic recovery to expansion continues. The euro area and EU economies are both estimated to have grown by 2.4% in 2017, the fastest pace in a decade. The growth forecasts for 2018 and 2019 have also been raised for both the euro area and EU: from 2.1% to 2.3% for this year and from 1.9% to 2.0% for 2019. This is a result of both stronger cyclical momentum in Europe, where labour markets continue to improve and economic sentiment is particularly high, and a stronger than expected pick-up in global economic activity and trade. Strong demand, high capacity utilisation and supportive financing conditions are set to favour investment over the forecast horizon. Meanwhile, core inflation is expected to stay subdued as labour market slack recedes only slowly and wage pressures remain contained. Risks to this growth forecast remain broadly balanced, with upside risks in the short term.