UBS Economics-European Economic Perspectives _European inflation monthly ...-116058398

ab20 June 2025Global ResearchEuropean Economic PerspectivesEuropean inflation monthly: June preview June inflation preview across EuropeAmid ongoing newsflow from the Middle East, oil prices are up 15% since the start of June. We expect higher oil prices to start feeding through to fuel prices already in June. Against this backdrop, we have, on balance, tweaked up our inflation projections over the next months. Below we present our expectations for June inflation for the Eurozone, UK, Switzerland and Sweden.Eurozone HICP: Headline +0.2pp to 2.1%, core +0.1pp to 2.4%We forecast June headline inflation (out on 1 July) to increase by 0.2pp to 2.1% y/y, with higher energy inflation (+1.1pp to -2.5% y/y) due to the recent spike in oil prices as the key driver. We also expect a 0.1pp increase in both food (to 3.3% y/y) and core inflation (to 2.4% y/y). Within core inflation, we expect services inflation to tick up 0.1pp to 3.3% y/y, while goods inflation is likely to remain unchanged at 0.6% y/y. At the country level, we expect increases across the board. Specifically, we forecast inflation to rise by 0.2pp to 2.3% y/y in Germany, +0.1pp to 0.7% y/y in France, +0.1pp to 1.8% y/y in Italy, +0.3pp to 2.3% y/y in Spain and +0.1pp to 3% y/y in the Netherlands. See also: Eurozone: Higher energy to push inflation up in JuneUK CPI: Headline stable at 3.4%, core -0.1pp to 3.4%Following a slightly smaller-than-expected decline of 0.1pp to 3.4% y/y in May, we forecast headline inflation to remain unchanged at 3.4% y/y in June (out on 16 July). Overall, we expect a decline in core inflation (-0.1pp to 3.4% y/y) to be offset by increases in energy (+0.8pp to -0.9% y/y) and food inflation (+0.1pp to 4.8% y/y). Within core, we forecast services inflation to decline 0.2pp to 4.5% y/y, helped by further easing in less volatile underlying services inflation. In contrast, goods inflation is likely to remain unchanged at 1.6% y/y. Looking ahead, our baseline foresees inflation peaking in September at 3.6% y/y, before declining to just under 3% by the end of the year. Overall, we expect inflation to average 3.2% in 2025 and 2.1% in 2026. Swiss CPI: Headline stable at -0.1% y/yAfter falling into negative territory in May for the first time since March 2021, we forecast inflation to remain unchanged at -0.1% y/y in June (out on 3 July). At the component level, we expect our definition of core inflation (headline excluding energy and food) to remain unchanged at 0.5% y/y, the lowest since April 2021. Similarly, food inflation is likely to stay unchanged at -0.3% y/y. In contrast, energy inflation is expected to rise +0.7pp to -7.6% y/y, amid the recent sharp rise in oil prices. However, with the unrounded forecast at -0.05% y/y and a risk of a stronger increase in energy prices, we see upside risk to our headline inflation forecast of -0.1% y/y. Swedish CPIF: Headline -0.2pp to 2.1% y/y, core +0.2pp to 2.7% y/yAfter a downside surprise in May, we expect CPIF headline i