Euro zone inflation expectations edge up for the year ahead: ECB

By Thomson Reuters Feb 23, 2024 | 3:06 AM

FRANKFURT (Reuters) – Inflation expectations among euro zone consumers rose for the year ahead and held steady for three years out, a new survey by the European Central Bank showed on Friday, adding to evidence that the final stage of taming price growth may be difficult.

Inflation came down rapidly last year and now stands just below 3%, but the ECB said it could take more than another year to get it down to its 2% target, despite a record string of interest rate hikes and anaemic economic growth.

Median expectations for inflation over the next 12 months rose to 3.3% in January from 3.2% December, while expectations for three years ahead remained unchanged at 2.5%, the ECB said, based on a survey of 19,000 adults in 11 euro zone countries.

Although energy prices are well below expectations and growth is weak, wage growth remains quick and policymakers have repeatedly said they need more comforting labour market data before they can sound the all clear and start cutting rates.

The survey showed that expectations for nominal income growth remained unchanged at 1.2%, but consumers persistently underestimate wage growth and the ECB expects compensation per employee to rise by 4.6% this year.

Consumers continued to expect slightly negative economic growth ahead but reduced their unemployment expectations.

(Reporting by Balazs Koranyi; Editing by Andrew Heavens)