Euro Area Inflation Forecast Update: More Fuel but Fire Contained

Goldman Sachs has raised its Euro area inflation forecasts to reflect rising energy refined spreads, chemical feedstock prices, and supply chain distortions. Headline inflation is now expected to peak at 3.4% yoy in late 2026.

Key Takeaways

• 1.Goldman Sachs has upgraded its Euro area headline inflation forecast to peak at 3.4% yoy in 2026Q4, driven by higher energy prices and refined product spreads.
• 2.Core goods inflation is being revised upward by 0.8% due to supply chain distortions and sharp price increases in chemical feedstocks.
• 3.Food inflation (FAT) is expected to remain pressured by freight and fertilizer costs, likely peaking later in 2027Q4 at 3.6%.

Table of Contents

• Approaching the Peak in Energy Inflation
• Food Inflation to Increase on Higher Energy, Freight and Fertiliser Prices
• Pipeline Cost Pressures Point to Higher Core Goods Inflation
• Some Indirect Effects to Services Inflation, But Still Limited Scope for Second-Round Effects
• Headline Inflation to Peak at 3.4%yoy, Core at 2.7%yoy

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