Societe Generale economists Sam Cartwright, Michel Martinez and Jorge Garayo note that Euro area inflation has not yet shown indirect effects from the energy shock in food or goods prices. They expect lower Brent to push headline inflation to 2.55% yoy in July and to trim around 0.5pp from 2026 inflation, but still see delayed pass-through lifting core and food inflation later in 2026.

Energy shock pass-through still delayed

"Euro area inflation has yet to show any signs of indirect inflationary effects from the energy shock. In the near term, euro area inflation is likely to benefit further from the fall in Brent, possibly pushing headline inflation to 2.55% yoy in July. However, the pass-through from higher upstream energy commodity prices to consumer prices takes time."

"Therefore, we still believe that indirect effects will push up core inflation and, alongside weather-related effects, food inflation later in the year, although these effects are likely to be weaker than previously estimated."

"So far, euro area inflation has yet to show any meaningful indirect inflationary effects from the energy shock in either food or goods inflation, the two sectors where these indirect effects are likely to be most prominent."

"However, given that food and core inflation tend to peak around 16 months after an energy shock, a large share of the inflationary effects from the shock and related supply disruptions have yet to pass through."

"More generally, the fall in energy prices has lowered our headline inflation forecast by around 0.5pp throughout 2026, with the peak in headline inflation now at 3% in late-2026, conditional on the MoU holding."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)