Euro zone consumers kept inflation expectations steady or lowered them in April. One-year ahead inflation expectations held steady at 4.0%, while three-year ahead expectations eased to 2.9%. Consumers anticipate a 2.2% economic contraction and expect nominal income growth to fall 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.
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.