Eurozone inflation set to stay elevated, ECB forecast shows

Inflation in the eurozone is expected to average 3% in 2026, according to the European Central Bank’s (ECB) September forecast.

Headline HICP inflation stood at 2.9% in July, up from 2.8% in June, following 3.2% in May. The latest increase was driven mainly by higher energy prices, particularly transport fuels, amid more expensive refined oil products, as well as the phasing out of some government support measures.

Inflation also rose in the services and non-energy industrial goods sectors, while underlying HICP inflation excluding energy and food edged up to 2.5% in July.

At the same time, food inflation continued to ease amid subdued price pressures further along the supply chain, including earlier declines in food commodity and producer prices.

The ECB said the impact of the ongoing Middle East conflict on non-energy consumer prices has so far remained limited. This is reflected in contained underlying inflation and relatively moderate price pressures at later stages of the pricing chain, while recent data indicate that indirect effects on food prices have been smaller than expected.

By Vafa Guliyeva