Eurozone: Inflation to stay elevated through 2027 - ABN AMRO

ABN AMRO analyzes overlapping supply-side shocks, including energy, food and supply bottlenecks, that are pushing Eurozone inflation higher. The bank expects Eurozone inflation to rise further in coming months and remain elevated through 2027, with food and goods pipeline pressures partly offsetting easing energy inflation. Wage growth and inflation expectations are highlighted as key variables for the European Central Bank.

Inflation wave driven by supply shocks

"As a result, eurozone inflation has been trending up in recent months and reached 4% in October. These shocks affect inflation through different channels and at different speeds."

"The ultimate persistence of the inflation impulse will depend on whether it raises inflation expectations and wage demands, generating second-round effects."

"We expect eurozone inflation to pick up further over the coming months and to stay elevated, as higher food inflation and pipeline pressures partly offset easing energy inflation in 2027."

"Ultimately, we expect the combination of looser labour market conditions and high interest rates to keep inflation expectations well anchored, and this should prevent a repeat of the persistent inflation dynamics seen in 2022-23."

"Another inflation wave is coming, but it should have a shorter tail."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)