FRANKFURT (Reuters) – Euro zone consumers lowered their inflation expectations last month, a fresh European Central Bank survey showed on Tuesday, just as the bank was making plans to start rolling back a record string of interest rate hikes.
Expectations for inflation in the next 12 months eased to 2.9% from 3.0% a month earlier to hit their lowest level since September 2021. Meanwhile expectations for inflation three years out slipped to 2.4% from 2.5%, still far above the ECB’s 2% target.
Inflation has come down quickly in the past year to hit 2.4% last month but the ECB now sees it oscillating around its current level for the rest of the year before disinflation kicks in again and the target is reached in 2025.
“Younger respondents continued to report lower inflation expectations than older respondents, although there was a convergence of inflation perceptions across age groups,” the ECB said in a statement.
The ECB has all but promised a rate cut on June 6, given the substantial slowdown in price growth but a number of policymakers are cautioning against a hasty second move, arguing that price pressures remain ample and getting inflation back to target was not a given.
Income expectations remained unchanged while consumers were also less pessimistic about growth, predicting a 0.8% contraction in the next year versus a 1.1% drop seen a month earlier.
They also expected only a slight increase in unemployment, implying a broadly stable labour market, the ECB added.
(Reporting by Balazs Koranyi; Editing by Alison Williams)
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