Goldman Sachs Warns Europe: Inflation Is Back

Goldman Sachs eurozone inflation forecast 3.2% Q2 2026

For European households and businesses that had only recently begun to breathe easier after the inflation crisis of 2022-2024, the findings of Goldman Sachs' March 2026 research note make for uncomfortable reading. The American investment bank now projects eurozone headline inflation peaking at 3.

2 percent in the second quarter of 2026 — a figure that, had it appeared in any forecast before February 28, would have been dismissed as an unrealistic tail risk. The driver is overwhelmingly the energy component.

Goldman economists calculate that the energy element of the eurozone consumer price index is swinging from minus 3. 1 percent to plus 5.

9 percent year-on-year in a single month — a statistical reversal of 9 percentage points driven almost entirely by the surge in oil and gas prices following the Iran conflict and the partial closure of the Strait of Hormuz. Spain is already feeling the pain: its national statistics office reported March inflation of 3.

3 percent year-on-year — the country's highest reading in years — even after the Spanish government halved VAT on most energy products as an emergency measure. The political implications are as significant as the economic ones.

The European Central Bank had been in the middle of a carefully managed rate-cutting cycle, bringing borrowing costs down as the previous inflation episode faded. That strategy is now under severe pressure, with some ECB Governing Council members already calling publicly for an interest rate rise at the April meeting.

For European citizens, who vividly remember fuel and food prices rising faster than wages in 2022-2023, the prospect of that experience repeating so soon is politically explosive.