Consumers in the eurozone have expressed significantly higher expectations for inflation in the upcoming months, according to the European Central Bank. This data comes after the central bank recently reduced the rate at which it was increasing interest rates, while also indicating that it may not yet be time to pause further adjustments.
ECB Reports Increased Consumer Inflation Expectations
According to the European Central Bank (ECB), Europeans anticipate inflation to be around 5% over the next year. The median expectations of consumers have increased significantly from 4.6% in February to their current level in March. These findings were revealed in the latest Consumer Expectations Survey (CES) conducted by the ECB.
The survey was conducted prior to the recent decision by the European Central Bank (ECB) to increase interest rates by 25 basis points. Despite slowing down the rate hikes, the ECB justified its decision by stating that although inflation has decreased, there are still strong underlying pressures on prices, indicating that more rate increases are probable in the future.
The European Central Bank (ECB) mentioned in a press release that there is a heightened level of uncertainty regarding inflation expectations for the next 12 months, reaching the highest point since the survey began in April 2020. Additionally, expectations for inflation over the next three years have increased from 2.4% to 2.9%.
Simultaneously, consumers anticipate a 1.3% rise in their nominal income over the next year, as compared to 1.2% in the previous survey. Furthermore, expectations for growth in nominal spending over the next 12 months have increased to 4.1%, up from 3.9% in February.
According to the European Central Bank (ECB), Europeans have slightly more negative expectations for economic growth in the next year. The forecasted growth rate decreased from -0.9% to -1.0%. Additionally, the expected unemployment rate for the same period increased from 11.5% in February to 11.7%.
The Consumer Expectations Survey (CES) is a monthly online survey conducted by the European Central Bank (ECB). It gathers insights from 14,000 consumers aged 18 and above across six euro area countries: Belgium, Germany, Spain, France, Italy, and the Netherlands. The ECB utilizes the survey results to analyze and inform its policies.
The most recent data from the survey aligns with the viewpoints of certain members of the ECB’s Governing Council. These members argue that ongoing inflation in the eurozone justifies the need for further increases in interest rates.