Poll: Euro zone inflation to average 1.9% in Q1 2026, 2.3% in Q2 2026, and 2.0% in 2026 (versus 1.7%, 1.9% and 1.8% in February poll)

Eurozone inflation is projected to average 1.9% in Q1 2026 and 2.3% in Q2 2026, according to updated polling data, reflecting a slight upward revision from prior estimates of 1.7% and 1.9%, respectively. The latest preliminary data from Eurostat confirms that annual inflation rose to 1.9% in February 2026, driven by a 3.4% year-over-year increase in services inflation and a rebound in core inflation to 2.4% (excluding energy, food, and tobacco) after hitting a four-year low of 2.2% in January according to Eurostat data. Energy prices continued to decline but at a slower pace (-3.2% year-on-year), while non-energy industrial goods inflation edged higher to 0.7% according to inflation data.

The ECB's Consumer Expectations Survey highlights a persistent gap between perceived and measured inflation, with consumers reporting inflation perceptions 1.2 percentage points above official figures since 2020 according to ECB reports. This discrepancy, attributed to factors like uneven price trends across sectors, remains a focus for policymakers. ECB President Christine Lagarde emphasized that inflation-reduction efforts have been effective, noting a sharp decline from the 10.6% peak in October 2022 according to economic analysis.

Looking ahead, the ECB is expected to maintain a data-dependent approach, with most economists forecasting unchanged interest rates in March and potential rate cuts later in 2026, contingent on inflation trends and labor market stability according to market forecasts. Goldman Sachs projects headline inflation will remain below the 2% target through 2027, while core inflation is seen easing to 2.1% in 2026 according to economic projections. The euro's strength and fiscal policies in key economies, such as Germany, may further influence inflation dynamics.

Annual inflation is projected to average 2.0% for 2026, aligning with ECB staff forecasts but slightly above the 1.8% previously anticipated in February polls according to inflation projections.