Italian Inflation Only Marginally Up In December

Data for December 2025 confirms that Italian inflation is no cause for concern. According to preliminary Istat data, headline inflation inched up to 1.2% on the year in December (from 1.1% in November). At the heart of the small uptick was an acceleration in transport services and fresh food, which more than compensated for an increasingly disinflationary pull from regulated energy goods and recreational services.

Core inflation, which excludes energy and fresh food, edged up to 1.8% on the year (from 1.7% in November), confirming the nearly flat profile which has been holding throughout 2025.

There were also no big changes in the goods versus services comparison. Services inflation edged up to 2.5% (from 2.3% in November) and goods inflation to 0.2% (from 0.1% in November), adding a minor 0.1% gap between the two readings.

Inflation is not an issue in Italy, and will not be one in 2026, in our view. There are multiple factors playing in this direction, acting on goods and services. On the goods front, a favourable base effect will continue to keep a lid on the energy component, at least over the first months of 2026. A relatively strong euro and aggressive export pricing policies from international trade partners partially redirecting their good export flows out of the US should also contribute to keeping inflation at bay.

On the services front, hourly wage growth, a key factor for services' costs, is not expected to accelerate in 2026 from the current 2.8% yearly pace. Business surveys from Istat have been showing decelerating pricing intentions in the service sector, pointing to a very small risk of an inflation acceleration down the road. A temporary exception might be related, in February and only in tourism-related activities, to the Milano-Cortina Winter Olympics, with limited impact on aggregate national inflation.

In the background, affecting both goods and services, is the prospect of a very slow recovery in consumption, notwithstanding expectations of a resilient labour market. Price pressures from excess demand seem highly unlikely at the current juncture.

All in all, Italian inflation looks set to follow a relatively smooth profile over 2026. We expect it to hover at the current level in the first quarter and gradually accelerate thereafter, temporarily reaching above 2% only in the fourth quarter. If this projected profile is confirmed, average inflation in 2026 would edge up to 1.6% (from 1.5% in 2025). The Italian component is not expected to make the ECB uncomfortable in its“good place”, at least in 2026.

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