Eurozone consumers reduced their inflation expectations last month, according to a recent European Central Bank (ECB) survey released on Tuesday. This comes as the ECB prepares to reverse a record series of interest rate hikes.
The survey revealed that expectations for inflation over the next 12 months dropped to 2.9% from 3.0% the previous month, marking their lowest level since September 2021. Additionally, inflation expectations for three years ahead decreased to 2.4% from 2.5%, although still above the ECB’s 2% target.
Inflation has declined rapidly over the past year, reaching 2.4% last month. The ECB anticipates that it will fluctuate around this level for the remainder of the year before disinflation resumes, aiming to meet the target by 2025.
“Young respondents continued to report lower inflation expectations compared to older respondents, although inflation perceptions across age groups are converging,” the ECB stated.
The ECB has signaled a likely rate cut on June 6, considering the significant slowdown in price growth. However, several policymakers advise caution regarding a second rate cut, noting that price pressures remain substantial and achieving the inflation target is not certain.
Income expectations remained stable, and consumers were less pessimistic about economic growth, forecasting a 0.8% contraction in the next year compared to a 1.1% drop predicted a month earlier.
Consumers also anticipated only a slight increase in unemployment, indicating a broadly stable labor market, according to the ECB.
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