The economic outlook for Europe and the euro area is cloudy due to trade tensions and global risks, including tariff threats from the US. While global and regional developments in the economy are important, people primarily focus on how these factors affect their daily lives. For households, inflation is one of the biggest concerns.
In 2024, annual inflation in the euro area, measured by the Harmonised Index of Consumer Prices (HICP), stood at 2.4% according to Eurostat. This headline inflation reflects the overall rise in consumer prices.
According to the European Central Bank’s (ECB) June 2025 projections, inflation in the euro area is expected to ease to 2.0% in 2025 and further to 1.6% in 2026, before returning to 2.0% in 2027.
At the same time, energy inflation is projected to remain negative until the end of 2026, and then to rebound in 2027 due to “the climate change-related fiscal measures,” according to the ECB.
Among the 30 European countries with available data, in nearly half of them inflation is projected to rise by the end of 2025, compared with 2024.
In some cases, however, the change—whether an increase or a decline—is very modest, at 0.3 percentage points (pp) or less.
The highest expected change in percentage point terms is expected to be in Lithuania, rising from 0.9% to 4%, followed by Latvia (1.4% to 3.6%). Still, they won’t be in the top five for inflation in 2025.
In Lithuania, rising food and energy prices have a significant impact on increasing the inflation rate. In Latvia, core inflation—which excludes energy and food—will remain high due to strong wage growth related to labour shortages, while food prices are also on the rise, according to the OECD report.
The increase in inflation will also exceed 1 percentage point in Bulgaria (1.4 pp) and Hungary (1.2 pp) in this period.
In Italy, Finland, and Ireland, the inflation rate is projected to rise by 0.8 percentage points or more.
Between 2024 and 2025, Turkey is projected to see a dramatic decline in inflation, dropping by 27.1 percentage points from 58.5% to 31.4%. However, it will remain an extreme outlier, as the second-highest rate in Europe is expected in Hungary at just 4.9%.
Apart from Turkey, the largest declines in inflation during this period are projected in Iceland (-2.4 pp), Sweden (-1.5 pp), and Belgium (-1.4 pp).
Inflation is expected to fall in 2026 compared with 2025 in most European countries, with only five projected to see an increase. Sweden is projected to see the largest increase, rising by 0.7 percentage points from 1.3% to 2.0%, followed by France with an increase of 0.5 percentage points from 1.2% to 1.7%.
However, France would still have the second-lowest inflation rate among all countries.
Apart from outlier Turkey (-12.9 pp), the largest declines are expected in Estonia, Croatia, and Lithuania, each falling by more than 1.5 percentage points.
The OECD projects that, apart from Turkey (18.5%), inflation will not exceed 3.7% in any other European country in 2026. Rates are expected to range from 0.6% in Switzerland to 3.6% in Hungary, followed by 3.4% in Romania. In the remaining 27 countries, inflation is projected to stay below 2.8%.
With France as the second lowest, following Switzerland, at 1.7%, inflation rates in many countries are expected to cluster between 1.7% and 2.7%.
