Euro Zone Consumers Decrease Inflation Expectations

FRANKFURT (Reuters) – Euro zone consumers have trimmed their inflation expectations for the next 12 months to the lowest level in three years, according to a European Central Bank poll released on Friday. This indicates that the ECB is making progress in its efforts to control rising prices.

The Consumer Expectations Survey acts as a barometer of household confidence in the ECB’s ability to achieve its 2% inflation target. Such confidence can influence consumer behavior, including spending, saving, and salary negotiations.

In the August survey, the median respondent anticipated a price increase of 2.7% in the next year, marking the slowest growth expectation since September 2021, down from 2.8% in July.

Additionally, consumers have lowered their inflation expectations for the next three years from 2.4% to 2.3%, the lowest since June.

Earlier this month, the ECB reduced borrowing costs for the second time since June, driven by declining growth forecasts and expectations for a gradual, albeit uneven, decrease in inflation over the next year.

Doves within the ECB are advocating for another rate cut in October, responding to recent weak economic data. However, this proposal is likely to face opposition from more hawkish members of the central bank, sources told Reuters.