Goldman Sachs Lowers Euro Area 2027 Headline Inflation Forecast to 2.7%
Updated
Summary
Goldman Sachs revised its Euro area headline-inflation forecast for 2027 down to 2.7% from 3.0% previously, and forecasts inflation of 1.9% year over year in 2028.
Why it matters
Goldman Sachs estimates that a 10% rise in crude oil now lifts Euro area headline inflation by 18 basis points through fuels, compared with 13 basis points historically. A 10% rise in TTF adds around 5 basis points through electricity and gas, compared with 8 basis points historically. The firm says the transmission mix has shifted toward oil, while aggregate headline-inflation sensitivity to a 10% energy-price shock remains 30 basis points.
Goldman Sachs updated its fuel-inflation forecast to incorporate product spreads directly and model fuel taxes separately. Its models indicate faster normalization of fuel-price pressures in 2027 and a larger negative base effect further out. The firm still expects Euro area energy HICP to peak at 18% year over year and headline inflation at 3.8% year over year in 2026 Q4.