Europe macro tracker It’s not over yet

Research evidence excerpt

Europe macro tracker It’s not over yet

24 June 2026

Europe macro tracker EconomicsEurope

It’s not over yet

◆ A lower peak in inflation and weak activity data support our view Emma Wilks

that rates will be unchanged… UK Economist HSBC Bank plc

emma.wilks@hsbc.com

◆ …but the BoE leant into the hawkish risks at its June meeting +44 20 3268 5948

◆ UK PM Starmer resigns, and a new PM faces a tough backdrop

Soft activity indicators support a ‘no change’ rate view…

The de-escalation of tensions in the Middle East has continued to fuel the decline in

global energy prices with Brent crude oil down another 2.3% w-o-w. That will see a

lower peak in inflation than previously expected, and coupled with a reopening of the

Strait, should mitigate the risk of inflation persistence. Assuming progress in the

Middle East, the ECB and BoE should be able to leave interest rates unchanged from

here, in our view. For the BoE, the policy rate was left unchanged at its June meeting

and the MPC noted that if second round effects were contained, it could tolerate a

slower return to target against a backdrop of soft demand (BoE decision, 18 June 26).

Activity data support that narrative: consumer sentiment failed to improve in June and

underlying retail sales growth was soft in May, although UK consumers appear to be

able to boost spending in relation to certain events and upped hot weather related

spend; the services sector may see a boost from the World Cup. For now, June PMIs

have seen UK services output fall to its lowest since January 2023, and a third month

of contraction was reported in the eurozone, where Germany and France were

notable drags. Manufacturing output steadied and could regain some momentum as

frontloading of purchases unwind, while hiring was soft.