The National Institute of Statistics and Economic Studies (STATEC) expects energy prices to increase until at least the third quarter of 2026, depending on how the situation in West Asia develops.
A seminar on the national consumer price index and inflation was held in Belval on Wednesday, providing an opportunity for STATEC to present its latest inflation forecasts. These forecasts are heavily influenced by the war in West Asia and its consequences: oil and gas prices have soared since the conflict began, and no end to the fighting is in sight.
This inevitably affects inflation forecasts, both in Luxembourg and elsewhere. STATEC relies on forecasts from Oxford Economics to predict the trajectory of gas, oil, and electricity prices, which strongly influence the level of inflation. These forecasts could change at any moment given the current geopolitical situation. However, at this stage, one thing seems certain: prices are expected to continue rising in 2026.
Oil prices could reach record levels if the Strait of Hormuz remains closed. A peak is expected this summer (August 2026), after which all three projected scenarios – low, central, and high – point towards a gradual decrease from the final quarter of 2026. As for gas prices, they could rise until the end of the year and then decline again in early 2027. But the impact is not over yet.
All models indicate that even if energy prices ease, the effects of the current crisis will inevitably feed through to food prices by the end of the year or even in early 2027. The price of services would also be impacted, albeit to a lesser extent. Nevertheless, STATEC emphasises that, given the “high uncertainties surrounding the international environment, the outlook remains particularly fragile and subject to rapid changes”.
Up to three upcoming wage indexations
STATEC presented three inflation hypotheses to the press on Wednesday morning: a low (optimistic) scenario, a central scenario, and a high (pessimistic) scenario. According to these scenarios, inflation could sit between 2.3% and 4% in 2026, depending on the course of events in West Asia. In any case, this would trigger at least two wage indexations, the first of which would occur as early as June.
The second wage indexation would be triggered at the latest in the third quarter of 2027 under the low scenario. However, if the war and the resulting crisis persist under the high scenario, a second wage indexation could occur as early as the third quarter of 2026, followed by an additional indexation a year later (third quarter of 2027). Under the central scenario, there would be two indexations, with the second occurring in the second quarter of 2027.
