Euro Inflation Watch: Past the Peak

Research evidence excerpt

Euro Inflation Watch: Past the Peak

Idea

July 1, 2026 05:41 PM GMT

Morgan Stanley Europe S.E.MEuro Inflation Watch | Europe Jens Eisenschmidt

Chief Europe Economist

Past the Peak Jens.Eisenschmidt@morganstanley.comJean-Francois Ouvrard +49 69-21662817

Deputy Chief European Economist

Jean-Francois.Ouvrard@morganstanley.com +49 69-21662813

June HICP decreased to 2.8%Y, with core at 2.4%Y. From here, Claire A Thuerwaechter

we expect headline to move down further but core to remain EconomistClaire.Thuerwaechter@morganstanley.com +49 69-21662842

sticky around this level up until early 2027. Our ECB call is Morgan Stanley & Co. International plc

unchanged. Chiara Zangarelli

Economist

A large downward surprise: Headline inflation declined to 2.8%Y in June from Chiara.Zangarelli@morganstanley.com +44 20 7677-3644

3.2%Y in May. This is in line with country releases since Monday (here) but lower Morgan Stanley Europe S.E.

than initially thought (MSe and consensus at 3.0%Y). The print was relatively soft Gabriela Silova

across all components. Energy inflation dropped on the back of lower fuel prices. Gabriela.Silova@morganstanley.com +49 69-21662832

The peak is most likely behind us. Food inflation declined further to 1.6%Y, its

Morgan Stanley & Co. International plc

lowest level since mid-21. We think this primarily reflects the disinflationary trend Skander Garchi Casal

currently at play for some products like meat and coffee. Economist

Skander.Garchi.Casal@morganstanley.com +44 20 7425-0034

Core cools in June: Core inflation declined to 2.4%Y in June from 2.6%Y, below

expectations (consensus: 2.5%Y). Goods inflation was stable at 0.9%Y, confirming a Exhibit 1 : We see 2027 HICP below target

solid momentum. We flag “chipflation” is affecting some IT products.