UBS Lifts Eurozone Inflation Forecast on Energy Prices

UBS economists have revised their Eurozone inflation forecast upwards due to rising energy prices and one-off increases in German healthcare costs. The bank now expects headline inflation to reach 3.5% year-over-year in September, up from 3.2% in August.

The economists led by Anna Titareva attribute the increase to higher energy inflation, which is expected to rise another 2.3% month-over-month in September. Core inflation is predicted to remain steady at 2.4%, while services inflation is forecasted to edge up slightly to 3.1%. In contrast, underlying measures such as exclusion metrics and trimmed means are broadly stable or slightly lower.

At the country level, UBS forecasts inflation rising in Germany to 3.3%, France to 2.9%, Italy to 3.4%, and Spain to 4.8%, while the Netherlands is expected to remain stable at 2.8%. The economists also pointed out that energy prices are pushing annual energy inflation up to 17% year-over-year, the highest level since January 2023.

Looking ahead, UBS expects inflation to ease temporarily to 3.4% in October due to a fuel tax cut in Germany before climbing back to 3.5% by year-end. The bank also warned of potential increases in gas and electricity tariffs in early 2027, which could further drive inflation upwards.