Eurozone Consumers Trim Near-Term Inflation Outlook, ECB Survey Reveals

ECB Survey Shows Eurozone Consumers Lower Inflation Expectations in May

Key Findings from the ECB Consumer Expectations Survey

Inflation Expectations and Policy Implications

FRANKFURT, June 26 (Reuters) — Eurozone consumers reduced their near-term inflation expectations in May while holding long-range views steady, according to a European Central Bank survey released Friday, easing immediate pressure on policymakers to resume rate hikes.

The ECB lifted its deposit rate earlier this month to combat persistent inflation, and several officials have signaled further tightening may be necessary to anchor price expectations. However, the timing of any additional move remains a subject of active debate.

Short and Long-Term Inflation Outlook

Consumers lowered their one-year-ahead inflation projection to 3.5% in May from 4.0% in April, while three-year and five-year expectations held at 2.9% and 2.4%, respectively, the ECB reported in its Consumer Expectations Survey.

Uncertainty and Demographic Differences

“Uncertainty about inflation expectations over the next 12 months decreased but remained at a higher level than before the start of the war in the Middle East,” the bank noted, citing a survey of 19,000 adults across 11 eurozone countries.

As in previous readings, lower-income households reported higher inflation perceptions and expectations, while younger respondents anticipated more moderate price growth.

Financial Market Reactions and Consumer Sentiment

Financial markets are pricing in between one and two additional rate increases, with the next move not fully priced until autumn.

Consumers also grew less pessimistic about growth prospects, forecasting a 1.7% contraction over the coming year compared with a 2.2% decline expected a month earlier. Income expectations improved marginally, though unemployment expectations also rose.

(Reporting by Balazs Koranyi; Editing by Christopher Cushing)

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