JPM Euro inflation

J P M O R G A N Europe Economic Research 17 September 2026

Euro area: Revising up inflation further

• Core prices sticky with rotation at play: less pressure from services; higher core Economic and Policy Research goods price pressure Raphael Brun-Aguerre ( • Energy lifting headline inflation, but energy pass-through to core limited so far • Tech prices putting further pressure on core inflation J.P. Morgan Securities plc

• We assume higher energy prices: headline inflation forecast now seen at 3.9%oya in 4Q26 and core inflation averaging 2.5%oya next year The August Euro area headline inflation print was revised down marginally (-1bp), but enough to bring the rounded number down from 3.3%oya to 3.2%. This final print stands 0.30%-pt above the July print. And the main details were largely unchanged: the rise in inflation was driven by a 4%-pts increase in energy price inflation to 14.3%oya, while food and core price inflation inched down a tenth to 1.1%oya and 2.4%oya, respectively. For core inflation, the decline was driven by services (down 0.3%-pts to 3.0%oya) while core goods inflation increased 0.3%- pts to 1.2%oya.

The full breakdown was released for the first time today and conveys a number of important points:

• Energy price inflation increase so far is mainly an oil story. The details show that the jump in energy price inflation was skewed towards fuel (now 24.5%oya). Gas price inflation and, to a lesser extent, electricity price inflation contributed to the rise in energy price inflation of late but remain at much lower levels (8.0%oya and 2.8%oya, respectively). We have argued in the past that the pass-through from market gas and electricity prices to HICP is slower than the pass-through of oil prices. • Services inflation does not show much evidence of energy pass-through. Some services are likely to be impacted by higher energy prices and, in particular, oil prices. This is the case for transport services. However, the inflation rate of transport services declined in August and has overall not increased in recent months compared to the start of the year. The inflation rate for recreational items (including package holidays and accommodation services) also declined in August. • The core goods inflation rise should be taken with a pinch of salt. Over July-August, core goods inflation jumped 0.5%-pts cumulatively, leaving core inflation at 1.2%oya, significantly above its long-term norm (around 0.6%oya between 1999 and 2019). Half of this increase was driven by a one-off increase in German medicine prices in July (a government decision). Another tenth was driven by the information and processing equipment category. The rest of the increase is contained across a fairly limited set of items and many core goods items have not seen a significant increase in inflation over the last two months. • Tech prices are playing a role. We have highlighted the role of tech prices in driving core inflation (core goods and services) higher over the last 12 months. The lift from tech has continued into August.

See page 10 for analyst certification and important disclosures.

Raphael Brun-Aguerre Europe Economic Research ( September 2026 JPMORGAN

The ECB seasonally adjusted data were revised up slightly for August and now show a 0.18%m/m sa increase for core prices (instead of 0.16%), with core goods prices up 0.33%m/ m sa and services prices up 0.10%m/m sa. Averaging the recent data to control for the monthly noise, core prices have been running at a 2.4% ar pace over June-August, broadly in line with the run rate seen earlier in the year. However, a significant rotation has taken place. Over the last three months, the run rate for services has been 2.4% ar, down from 2.9% in 1Q, while the run rate of core goods prices has been 2.4% ar, up from 1.2% in 1Q.

We make a number of changes to our forecast today, and now expect headline and core inflation to reach a higher level over the coming quarters:

• We increase our near-term assumption for market energy prices. We now assume Brent prices at $100/barrel in the near term, going down to $90 at the end of the year and $70 by the end of 2027. We also assume that gas prices hover around €80/Mwh…