欧洲经济：和平的鸽派？

European Economics The doves of peace? Lower oil prices mean a lowerpeak in inflation… …easing the pressure on centralbanks and supporting growth… …even as the region remainsstructurally challenged Play video withSimon Wells Disclosures & Disclaimer:This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. Executivesummary The doves of peace? Energy price falls mean a lower peak in inflation… The mid-June deal between the USand Iran sent energy prices and futures curves sharplylower. For our base case, we assume that energy prices follow futures. This means that weforecast inflation to peak significantly lower than we assumed in our mid-May forecast update. Specifically, our base case is now for eurozone inflation to average 2.9% this year and 2.2% in2027 (below the 3.3% and 2.4% projected in May update, but close to the base case we hadthree months ago). In the UK, we expect CPI inflation to rise to about3.6% y-o-y by November2026 and stay there until March next year. It should then start to come down quite quicklytowards the BoE’s target, ending 2027 at 2.3%. ...which should mean smaller indirect effects and risks of second-round effects on wagesLower energy inflation should also reduce both the indirect energy effects and risks of a second-round impact oninflation expectations and wages. Indirect effects tend to show up in foodinflation first, thoughthey usually take a year to feed through fully.So far therehas been littleimpact on food prices, though it is too early to draw firm conclusions. And the falls in energyprices have already fed through to business surveys of pricing actions. Underlying growth in Q1 was robust and business surveys indicate cyclical resilience…The energy shock hit consumer confidence hard and leading indicators of business activity fell.But they have not plunged to deeply depressed or recessionary levels. So, given that the worldeconomy has experienced one of the biggest disruptions to oil markets in history, the impacthas not (so far) been as bad as it might have been. In addition, underlying Q1 growth wasrelatively robust (although a big drop in Irish GDP weighed on the eurozone headline number). …but a real income squeezemeansgrowth will remain sluggish in many economiesAlthough inflation is set to peak lower, there is likely to bea period ofsluggish growth in real-terms incomes. We forecast eurozone growth of 0.3% in 2026 and 0.9% next year–whileexcluding Ireland, growth would be 0.7% in both years. In the UK, squeezed real incomes arecompounded by tighter financial conditions, politicalupheaval and a weak jobs market. We seeUK GDPgrowth of 1.0% in2026 and2027. By contrast, Scandinavia is a bright spot for growthin Europe. Persistent inflation? This time it’s different Despite the welcome resilience, we don’t expect inflation to be as persistent as it was after the2022 energy shock for three broad reasons. First, the jobs market is much softer and leveragetobargain forpay rises greatly reduced. The ‘war for talent’ of a few years ago has shifted to a ‘greathunkering down’ in labour markets with firms seemingly in a ‘no hire, no fire’ mode.Second, theenergy shock has so far been smaller than in 2022–especially in gas.Third, the policy stance istighter. In 2022,central banks allowed real policy rates to fall to very low levels which, alongsidefiscal support, resulted in a mini credit boom. Currently, monetary policy is close to neutral in mostWestern European economies,whilefiscal policy is set to tighten next year. Can central banks let slip the doves of peace? Against this backdrop, we think the ECB might already be done.By the time we get into late Q3or beyond, the case for tightening will be flimsy if energy prices have followed futures curves.Inflation will likely be projected to fall below target, and monetary policy lags mean rate rises inSeptember of December could exacerbate this–especiallywithtighterfiscal policy.Indeed, wethink the ECB may look to cut rates in Q3 2027. In June, the BoE chose to wait and see rather than hike, preferring to let a tightening in effective(market) financial conditions act as insurance. This strategy recalls the ‘Maradona’ effect set outby former BoE Governor Mervyn King in 2005. While not without risks, the recent energy pricefalls means it may have pulled it off. We now expect Bank Rate to be on hold for a prolongedperiod, with the next move being down (in November 2027). Things could still get ugly Much depends on whether energy prices really do follow futures curves. Since the Middle Eastconflict escalated in late February, there has been something of a disconnect betweenfinancialmarket prices and the views of energy experts.For example, HSBC’s oil and gas analysts havecited numerous risks to trafficthrough the Strait of Hormuz normalising.So we also set out an‘ugly’ scenario in which traffic returns toonly60% of pre-con