Key facts
- Euro zone consumers kept inflation expectations steady or lowered them in April.
- One-year ahead inflation expectations held steady at 4.0%.
- Three-year ahead inflation expectations eased to 2.9% from 3.0%.
- Five-year ahead inflation expectations remained unchanged at 2.4%.
- Consumers anticipate a 2.2% economic contraction in the year ahead.
- Expected nominal income growth over the next 12 months fell to 0.8%.
This survey is an important input for the ECB's policy deliberations. While inflation has surged above the ECB's 2% target, the benign consumer expectations suggest that medium-term price bets are not significantly unanchored. This could influence the pace of future interest rate hikes. A Reuters analysis of corporate earnings commentary indicates that only a third of large euro zone companies are raising prices due to the Iran war, suggesting weak demand is curbing pricing power, unlike in 2022.