Euro zone consumers see lower inflation ahead

Frankfurt, July 5 (BNA): Eurozone consumers in May cut their inflation forecasts again for the next 12 months, although they still see prices rising faster than the European Central Bank (ECB) would like for years to come, a new survey by the bank shows. European Central on Wednesday.

The European Central Bank’s monthly survey of consumer expectations, which also showed modest income growth forecasts, was likely to provide some relief to policymakers who are deploying relentless rate hikes to fight a bout of high inflation in the 20 countries that share the euro.

The average respondent in the May edition of the survey expected prices to grow 3.9% in the next 12 months, down from 4.1% in April and 5.0% in March, partly reflecting lower achieved inflation.

According to Reuters, uncertainty about the inflation outlook 12 months ago, as measured by a scattering of responses, has fallen to its lowest level since March 2022.

But consumers had expected inflation to come in three years ago at 2.5%, unchanged from April and still above the European Central Bank’s 2% target.

Speaking shortly before the survey was released, ECB policymaker Joachim Nagel said it was important to keep inflation expectations well anchored, but he was wary of calling for a new era of higher interest rates.

The European Central Bank raised interest rates by an unprecedented 4 percentage points in the past year and decided to raise its ninth consecutive rate in July, with another hike expected in September as well.

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The survey also showed that consumers expected their nominal income to grow at 1.2% to reduce inflation in the next 12 months, while spending saw a rise of 6.8%.

This implies less savings or more borrowing, and should ease concerns about a potential spiral between wages and prices.


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