European inflation: what to expect next week

Next week will be one of the most important of the autumn for European markets. New data on euro area harmonized inflation (HICP) and German national inflation will be published, two crucial indicators for understanding whether the recent recovery in prices is becoming a stable trend. In parallel, Christine Lagarde and several members of the Bundesbank will speak, and their comments could significantly shape expectations on rates and the euro.

The wait: prices rising and the ECB cautious

In recent months, consumer prices in the Eurozone have shown a slight recovery , driven by rising service prices and rising wages. According to the latest ECB projections, average inflation for 2025 will remain around 2.1% , but with a real risk of further upward surprises .

If next week's data were to show lower-than-expected inflation (1.9–2%) , the market would interpret it as a sign of stability and possible monetary easing in 2026. But if the data were to exceed 2.2% , the scenario would change radically: the ECB would find itself forced to maintain a restrictive line for longer, postponing any rate cuts.

This is the balance on which the euro's future hinges: too high inflation would cripple growth, but too abrupt a slowdown would reignite fears of stagnation.

Germany takes center stage

Germany remains the benchmark for the entire bloc. The latest data shows annual inflation of 2.4% , up from previous months. The recovery in prices is driven by the service sector, wages and more lively domestic demand compared to 2024. At the same time, manufacturing continues to show signs of weakness and compressing margins.

The Bundesbank expects inflation to fall to 1.5% in 2026, but the short-term outlook remains more complex. Several speeches by Buba members are expected next week, including Joachim Nagel and Claudia Buch:

• if they adopt a tough tone , reiterating the need to contain price pressures, European yields could rise;

• If, on the other hand, they suggest a more neutral observation phase , the markets could anticipate a softer stance on the part of the ECB.

Historically, the Bundesbank's words have a significant impact on German sentiment and the entire European bond market.

Lagarde in the spotlight

Christine Lagarde will also speak twice next week, between Tuesday and Thursday. No official decisions are expected, but the tone of her speeches will be decisive.

• A cautious speech, emphasizing the importance of “remaining vigilant” without closing the door to a future easing, would be interpreted as a balanced and reassuring message.

• A more aggressive intervention, focused on the risk of persistent inflation, would push the euro higher and could weigh on stock markets.

The ECB president finds herself in a delicate position: she must acknowledge the recent rise in prices without fueling fears of a new inflationary spiral.

The Euro and the Markets: A Subtle Balance

In recent months, the euro has maintained a strengthening trend , supported by expectations that the ECB will maintain a more restrictive policy than the Fed. But if the data confirm a further increase in prices, the appreciation of the single currency could accelerate.

A strong euro helps contain import costs, but penalizes exports from Germany, Italy, and France. Consequently:

• Weak data + cautious tone from the ECB → softer euro, stock markets rise;

• Strong data + firm tone from Buba → stronger euro, rising yields and greater pressure on the price lists.

Conclusion

Next week will be a crucial test to assess the strength of the price recovery in Europe . The data and the words of Lagarde and the Bundesbank will offer clear indications of the direction monetary policy will take in the coming months.

Europe is no longer worried about too low inflation, but the opposite: a return of prices above 2%, which risks slowing growth and delaying any rate cuts. For European stock markets, the real balance to seek will be between manageable inflation and flexible monetary policy —the combination that could restore investor confidence in late 2025.