Inflation in Greece will remain well above the European Central Bank’s 2% target through 2026 before drifting lower over the following two years, according to the latest projections from the Bank of Greece.
In its new Inflation Monitor, the central bank forecasts that harmonized inflation, the EU-standardized measure known as the HICP, will reach 3.8% in 2026, up from 2.9% in 2025. From there, it expects a gradual descent to 2.6% in 2027 and 2.3% in 2028. The figures are unchanged from the bank’s previous report.
The Bank of Greece attributes this year’s pickup mainly to higher energy prices, persistent inflation in the services sector, rising rents and the strong pressures generated by tourism demand.
Core inflation, which strips out volatile energy and food prices, is proving equally sticky. The central bank expects it to run at 3% in 2026 before easing to 2.5% in 2027 and 2.3% in 2028, a trajectory that confirms price pressures in services are unlikely to fade quickly.
A first sign of relief
Despite the downbeat annual outlook, the most recent data point to an early cooling. Harmonized inflation in Greece fell to 3.9% in June from 4.9% in May, bringing the first-half average to 3.8%. The decline is driven largely by softer energy costs, a reflection of lower international oil prices, along with a slowdown in price increases across services, chiefly accommodation, air travel and rents.
Even so, Greece continues to run hotter than the rest of the currency bloc. Eurozone inflation stood at 2.8% in June, against 3.9% in Greece, though the gap between the two narrowed compared with May.
The services headache
The report underscores that, despite the sharp rise in energy prices during the first half of the year, services remain the primary force keeping inflation elevated in both Greece and the eurozone. In Greece, wage increases, higher rents and buoyant tourism demand are sustaining pressure on services prices, making a faster decline in the headline rate harder to achieve.
Energy risks have not gone away
The Bank of Greece cautions that the energy crisis is far from over. While oil prices retreated over the past month as flows through the Strait of Hormuz normalized, renewed tensions in the Middle East have pushed them back up. At the same time, natural gas is becoming more expensive as European demand rises to build storage ahead of winter.
The central bank expects energy inflation in Greece to surge to 11% in 2026 before collapsing to 1% in 2027. A modest reacceleration to 2.4% is projected for 2028, tied to the rollout of the EU’s new ETS2 emissions trading system, which extends carbon pricing to fuels used in buildings and road transport.
Businesses and markets brace for lasting pressure
Although increases in manufacturing production costs slowed in June, they remain high on the back of costlier raw materials, transport and energy, the report notes. Businesses’ selling prices, in turn, are still climbing, even if at a more moderate pace.
Analysts have revised their expectations for Greek inflation upward. Drawing on Consensus Forecasts data cited by the Bank of Greece, estimates rose by 0.6 percentage points for 2026 and 0.4 points for 2027, with the average projection for 2026 now standing at 2.9%.
Rate outlook
The easing of global inflation expectations has not materially changed the market’s view of the ECB’s next moves. Following the central bank’s rate increase in June, markets are still pricing in one more hike of 25 basis points by the end of 2026, while the renewed tension in the Middle East has raised the odds of a further increase in early 2027.
Source: ot.gr
