UBS Boosts Eurozone Inflation Forecast to 3.5% on Energy Costs

UBS has revised its forecast for Eurozone inflation, increasing it to 3.5% year-over-year in September due to higher energy costs and a one-time bump in German medical expenses. This is up from their previous projection of 3.2% in August. The bank's team of economists, led by Anna Titareva, anticipates that energy prices will continue to climb, reaching 17% year-over-year in September.

According to UBS, the August inflation figure did not indicate a widening of price pressures, as the final Eurozone HICP estimate was adjusted downward to 3.2% from an initial 3.3%. However, underlying gauges including exclusion metrics and trimmed means were largely steady or marginally weaker.

The bank also notes that rising inflation expectations are a concern, with gains seen across most measures, although longer-term expectations remain anchored near 2%. UBS' wage tracker indicates negotiated wage growth remained around 2.9% year-over-year in July and August, with no evidence of second-round effects thus far.