UBS Economics-European Economic Perspectives _European inflation monthly ...-118434752

ab23 October 2025Global ResearchEuropean Economic PerspectivesEuropean inflation monthly: October preview October inflation preview across EuropeSeptember inflation turned out to be mixed with stable inflation in the UK and Switzerland, a rise in the Eurozone but a drop in Sweden. Mixed inflation outcomes are likely to prevail in October as well, with our forecasts foreseeing declines in the UK and Eurozone, unchanged inflation in Sweden, but a pick-up in Switzerland. Eurozone HICP: Headline and core -0.1pp to 2.1% and 2.3%, respectivelyWe forecast October Eurozone inflation (out on 31 October) to decline by 0.1pp to 2.1% y/y, largely driven by falls in energy (-0.3pp to -0.7% y/y) and food inflation (-0.4pp to 2.6% y/y). While rounded core inflation is likely to show a decline to 2.3% from 2.4%, our unrounded forecast is still at 2.35%, effectively unchanged from September. Within core inflation, we expect both services and goods inflation to remain unchanged at 3.2% y/y and 0.8% y/y, respectively. At the country level, we expect inflation to ease in most of the large Eurozone countries. Specifically, we expect inflation to fall 0.2pp to 2.2% y/y in Germany, by 0.1pp to 1% y/y in France, 0.2pp to 1.6% y/y in Italy and by 0.1pp to 2.9% y/y in the Netherlands. In contrast, Spanish inflation is likely to remain unchanged at 3% y/y. See Eurozone: Inflation likely to ease to 2.1% in OctoberUK CPI: Headline -0.3pp to 3.5%; core -0.1pp to 3.4%September CPI delivered some positive news with inflation staying unchanged at 3.8% y/y, contrary to expectations of a further increase (UBSe, consensus, BoE: 4% y/y). With that, we think the inflation peak now lies behind with inflation likely to fall 0.3pp to 3.5% y/y in October (out on 19 November). We expect this decline in headline to be in almost equal parts driven by lower core and energy inflation, while food inflation is likely to remain unchanged. More specifically, we forecast energy inflation to fall 2.4pp to 1.9% y/y, helped by negative base effect, while core inflation is likely to decline 0.1pp to 3.4% y/y. Within core, we expect goods inflation to remain unchanged at 1.5% y/y, while services inflation is likely to fall by 0.2pp to 4.4% y/y. Food inflation is likely to be stable at 4.9% y/y. Looking ahead, we expect inflation to ease to 3.3% y/y by December 2025 and 2% by December 2026 with the annual averages at 3.4% in 2025 and 2.2% in 2026. However, we continue to view the balance of risks to our inflation outlook as skewed to the upside. Swiss CPI: Headline likely up 0.2pp to 0.4% y/y, risks skewed to the downsideFollowing three consecutive months of Swiss inflation at 0.2% y/y, we forecast a 0.2pp increase to 0.4% y/y in October (out on 3 November). With the unrounded forecast at 0.36% y/y, we acknowledge some downside risk to our projection. At the component level, we expect the increase to be driven by higher energy and food inflation, while our definition of core inflation (headline excl