According to the European Central Bank’s (ECB) Consumer Expectations Survey, medium-term inflation expectations of consumers in the Eurozone increased for the second month.
The ECB announced the results of the Consumer Expectations Survey for November 2024.
Accordingly, the average inflation expectation of consumers in the Eurozone for 12 months increased from 2.5 to 2.6 percent. In October 2024, the average inflation expectation of consumers in the region for 12 months increased from 2.4 to 2.5 percent.
Consumers’ inflation expectations for the next 3 years increased from 2.1 percent to 2.4 percent, the highest level since July.
While it is noteworthy that both expectations are above the ECB’s 2 percent inflation target, ECB officials had previously evaluated these levels as “close” to the 2 percent target.
The expectations of consumers in the region regarding economic growth decreased by 0.2 points compared to the previous month, falling to minus 1.3 percent.
The ECB’s Survey of Consumer Expectations is published monthly. The survey is conducted by interviewing approximately 14 thousand people from Germany, France, Italy, Spain, the Netherlands and Belgium, which represent approximately 85 percent of the Eurozone GDP.
Inflation expectations play an important role in the Central Bank’s monetary policy. How far and at what pace the ECB will go about increasing interest rates will determine the inflation outlook.
Meanwhile, according to European Statistics Office (Eurostat) data, annual inflation in the Eurozone, which was 2.2 percent in November 2024, increased to 4 percent in December 2024.
On the other hand, on December 12, the ECB made its fourth interest rate cut against the weakening economy in line with market expectations, reducing the three main policy rates by 25 basis points.
The bank reduced the deposit interest rate from 3.25 percent to 3 percent. The ECB’s next interest rate meeting will be held on January 30.
Meanwhile, in recent weeks, leading representatives of the ECB had signaled further interest rate cuts in 2025, given declining inflation risks and the weak economy.
