Eurozone inflation expectations at 14-month low

The European Central Bank has announced the results of its Consumer Expectations Survey for May.

Accordingly, the average inflation expectation of consumers in the Eurozone for 12 months decreased from 4.1 percent to 3.9 percent. Thus, consumers’ expectations for Eurozone inflation fell to the lowest level since March 2022 in May.

Consumers’ inflation expectations for the next 3 years remained constant at 2.5 percent. The ECB targets 2 percent inflation in the medium term.

It is noteworthy that the economic growth expectations of the consumers in the region are more optimistic compared to the previous month, and the economic growth expectation of the consumers for the next 12 months, which was minus 0.8 percent in April, rose to minus 0.7 percent in May.

Consumers expect unemployment to average 11 percent over the next 12 months. This rate was predicted as 11.2 percent in April.

The ECB’s Consumer Expectations Survey is published monthly. The survey is conducted by interviewing about 14,000 people from Germany, France, Italy, Spain, the Netherlands and Belgium, which represent about 85 percent of Eurozone GDP.

Inflation expectations play an important role in the monetary policy of the ECB. How far and how fast the ECB will go about interest rate hikes will determine the outlook for inflation.

It was noteworthy that the ECB took the fastest tightening step by increasing interest rates by a total of 400 basis points since July 2022, despite the expectation of a recession in the economy.

On the other hand, according to the data of the European Statistics Office (Eurostat), annual inflation in the Euro Area, which was 6.1 percent in May, was 5.5 percent in June.