Europe faces mixed inflation outlook in 2025-2026

Europe’s economic outlook remains uncertain amid global risks, trade tensions, and tariff threats from the US, with households closely watching inflation trends that affect daily life.

In 2024, euro area inflation, measured by the Harmonised Index of Consumer Prices (HICP), was 2.4% (Eurostat), Euronews writes. 

The European Central Bank (ECB) projects euro area inflation will ease to 2.0% in 2025 and 1.6% in 2026, before rebounding to 2.0% in 2027. Energy inflation is expected to stay negative until 2026, rising in 2027 due to climate-related fiscal measures.

Among 30 European countries, nearly half are projected to see inflation rise by the end of 2025, though often modestly. Lithuania and Latvia could see the largest increases, driven by higher food, energy, and wage-related costs. 

Bulgaria, Hungary, Italy, Finland, and Ireland are also expected to see notable increases. Türkiye remains a major outlier, with inflation falling sharply from 58.5% in 2024 to 31.4% in 2025 but still far above other countries.

Among Europe’s largest economies, the UK is projected to have the highest inflation in 2025 at 3.1%, driven by wage hikes and higher utility costs, while France will record the lowest at 1.2%, aided by electricity tariff cuts.

In 2026, inflation is forecast to decline across most countries, with only a few exceptions such as Sweden and France seeing modest increases. Rates outside Türkiye are expected to remain below 3.7%, clustering between 1.7% and 2.7% in most countries.

The OECD notes that both fiscal and monetary policies have helped reduce inflation, though risks remain from US tariffs and trade uncertainties. Real disposable income in the euro area grew 2.2% in 2024, slowing to 0.8% in 2025 and slightly rising to 1.0% in 2026, affecting household spending and savings.

By Sabina Mammadli