Euro Zone Consumers See Stable Inflation, ECB Survey Shows

Post by : Saif Nasser

A recent survey by the European Central Bank (ECB) shows that consumers in the euro zone expect only minor changes in inflation, suggesting price growth remains under control and further interest rate cuts may not be necessary.

The survey, conducted in October with 19,000 adults across 11 euro zone countries, found that consumers expect inflation in the next year to rise slightly to 2.8%, up from 2.7% in the previous month. Expectations for price growth over the medium and long term remain steady, with inflation projected at 2.5% in three years and 2.2% in five years.

These results indicate that the euro zone is maintaining a stable inflation path, a notable achievement for the ECB after years of struggling with very low inflation followed by a sharp post-pandemic surge above 10%. Policymakers see the current figures as confirmation that prices are gradually returning to the ECB’s 2% target.

Financial markets reacted by reducing expectations for future interest rate cuts. Analysts now see almost no chance of a rate reduction next month and only a one-in-three likelihood of easing next year. Most economists believe the ECB’s interest rate cycle has reached its lowest point.

Consumer expectations for income and spending also align with the stable inflation outlook. Income growth over the next year is expected to rise slightly to 1.2%, while anticipated spending growth remains unchanged at 3.5%.

Although the ECB remains open to the possibility of additional rate cuts, policymakers appear cautious. Some argue that the bank may have finished cutting rates, especially after reducing the deposit rate by half over the year leading to June.

Overall, the survey suggests that euro zone consumers feel confident that prices will remain manageable, giving the ECB room to maintain a steady policy approach without rushing into further rate adjustments.

This stable inflation outlook provides reassurance to both households and businesses, indicating that the euro zone economy is likely to continue on a controlled and predictable path in the months ahead.

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