Market Analysis
Eurozone consumers revised down their inflation expectations last month, according to a recent survey by the European Central Bank. This shift comes as the ECB prepares to unwind a series of historically high interest rate hikes.
Expectations for inflation over the next 12 months decreased to 2.9% from the previous month's 3.0%, marking the lowest level since September 2021. Projections for inflation three years ahead also dipped to 2.4% from 2.5%, although this remains above the ECB's target of 2%.
Despite inflation easing to 2.4% recently, the ECB anticipates it will hover around this level for the remainder of the year before potentially declining further to reach the target by 2025.
The ECB noted that younger respondents consistently reported lower inflation expectations compared to older respondents, although there has been a narrowing of inflation perceptions across different age groups.
Anticipating a rate cut on June 6 due to the significant slowdown in price growth, the ECB faces differing opinions among policymakers regarding the timing of additional measures. Some argue that despite recent declines, inflationary pressures remain significant, emphasizing the uncertainty in achieving the inflation target.
Income expectations remained stable, and consumers expressed less pessimism about economic growth, forecasting a milder contraction of 0.8% in the coming year compared to 1.1% previously anticipated. Expectations for slight increases in unemployment suggest a broadly stable labor market, according to the ECB's statement.
Paraphrasing text from "Reuters" all rights reserved by the original author.