UBS (Union Bank of Switzerland) has increased its annual inflation forecast for the Eurozone to 3.5 percent for September 2023. This increase is due to rising energy prices and a temporary rise in healthcare costs in Germany. According to recent assessments, economists led by Anna Titareva predict that inflation will rise to 3.6 percent by early 2027.
Details of the Inflation Forecast
UBS has also raised its average annual forecasts for 2026 and 2027 to 2.9 percent and 2.7 percent, respectively. In September, energy prices are expected to increase by 2.3 percent compared to the previous month, and energy inflation is projected to reach 17 percent compared to last year, the highest level since January 2023. Additionally, core inflation is expected to remain at 2.4 percent.
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Inflation Analysis and Contributing Factors
UBS analyses indicate that in the August inflation report, rising energy prices were identified as the main factor, while other underlying metrics such as excluded measures and reduced averages remained generally stable or slightly decreased. Service inflation for this month reached 0.1 percent, and goods inflation reached 0.3 percent. The annual rate of service inflation has decreased to 2.8 percent, the lowest level in over a year.
Nationally, inflation is expected to rise to 3.3 percent in Germany, 2.9 percent in France, 3.4 percent in Italy, and 4.8 percent in Spain. The Netherlands is also expected to remain stable at 2.8 percent.
UBS has pointed to rising inflation expectations as the "main disappointment" in the August data; however, long-term forecasts remain stable at around 2 percent. Additionally, the wage growth index indicates that agreed wage growth in July and August has reached 2.9 percent annually, with no signs of second-round effects observed yet.
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