Euro area February 2026 inflation data is due this week for Belgium, France, Spain, Slovenia, Portugal and Germany, with more releases next week. Nomura expects euro area HICP inflation to average marginally below the ECB’s 2.0% target in H1 2026, mainly due to energy base effects.
For 2027 and 2028, Nomura expects risks to lean higher. The drivers cited are a strong labour market, rising wage pressures and GDP growth running above potential.
Medium Term Curve Steepening Opportunity
In Germany, risks are described as lower than Nomura’s forecast because of energy prices and the possibility of further pass-through from reduced electricity grid prices. At the same time, services inflation is listed as a risk on the higher side.
In France, the rise in February versus January is attributed almost entirely to base effects from energy prices. Downside risks are linked to a cut in regulated energy prices.
For Spain, Nomura describes the balance of risks as even.
With key inflation data for February 2026 being released, we expect the numbers to print marginally below the ECB’s 2% target. This is largely a technical story driven by energy base effects, as we are now comparing prices against the spike seen in early 2025. This temporary dip could keep short-term rate expectations anchored for now.
Options And Volatility Positioning
We see the risk that the market is too focused on this temporary disinflation and is ignoring the pressures building for 2027. Eurostat’s latest data shows unemployment holding at a multi-decade low of 6.4%, and the ECB’s wage tracker for Q4 2025 was still hot at 4.1%. These factors, combined with GDP growth now projected to run above potential, point to inflation pressures returning strongly.
This creates a clear opportunity in the rates market to position for a steeper yield curve over the medium term. Traders could look at using interest rate swaps or futures to bet on longer-term rates rising more than short-term rates. This view suggests that current pricing for late 2027 and 2028 does not fully reflect the upcoming wage and growth pressures.
The divergence between the near-term outlook and the longer-term inflation risks suggests a period of higher uncertainty for central bank policy. This environment could be favorable for traders who use options to position for an increase in interest rate volatility. The current calm might be under-pricing the potential for a sharp policy debate later this year and into 2027.
