Europe’s Inflation Cooldown Gains Pace—But Risks Linger Ahead

Eurozone inflation eased to 2.1% in Oct. 2025, slipping from 2.2% in Sept., according to the latest figures from Eurostat. A year earlier, the rate stood at 2.0%. Greece recorded one of the lowest inflation rates in the EU—1.6%, down from 1.8% the previous month and well below the 3.1% seen in Oct. 2024.

Across the broader European Union, annual inflation also moderated, falling to 2.5% in Oct. compared with 2.3% a year earlier. Cyprus (0.2%), France (0.8%) and Italy (1.3%) posted the lowest rates, while Romania (8.4%), Estonia (4.5%) and Latvia (4.3%) logged the highest. Month-to-month, inflation decreased in 15 member states, held steady in three, and rose in nine.

Services remained the dominant driver of eurozone inflation, contributing 1.54 percentage points, followed by food, alcohol and tobacco (0.48 points), non-energy industrial goods (0.16 points), while energy continued to exert a mild deflationary effect (-0.08 points).

Commission Forecasts Hint at a Mixed Path Forward

Even as Europe edges toward price stability, fresh analysis from the European Commission signals that inflation pressures may not fully dissipate in the coming months. Based on 16 predictive models, the Selling Price Expectations (SPE) index suggests a nuanced outlook across sectors.

Food prices are projected to rise slightly toward the end of 2025 before easing in early 2026, though upward risks persist. Non-energy industrial goods are expected to maintain steady inflation between 0.7% and 0.8%, with minimal pressure for increases.

Services inflation is seen stable through Jan. 2026, then gradually climbing toward 3% by April, driven largely by stubborn wage costs. Energy is forecast to enter a deeper deflationary phase in early 2026, stabilizing near –1% by April.

Overall inflation is expected to dip to around 1.6% over the next four months before returning to the 2% target by April 2026.

Source: tovima.com