Euro zone consumers trim near-term inflation expectations: ECB

A view of the European Central Bank (ECB) headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker/File photo

FRANKFURT  – Euro zone consumers have trimmed their expectations for inflation over the next 12 months, a European Central Bank poll showed on Tuesday, in a sign the ECB’s credit-tightening efforts are having an impact.

The Consumer Expectations Survey (CES) is used by policymakers to gauge whether the steepest streak of interest-rate hikes in the euro’s history has persuaded households that once runaway inflation will fall back to the ECB’s 2 percent inflation goal.

The latest poll, carried out in December on an expanded panel of 11 countries, showed the median household expected prices to rise by 3.2 percent in the following 12 months, down from 3.5 percent a month earlier.

READ: European Central Bank leaves key interest rate at a record high

On the flipside, expectations for inflation three years ahead remained slightly above the ECB’s goal, even rising slightly to 2.5 percent from 2.4 percent.

The result for the previous months were restated to include responses from Ireland, Greece, Austria, Portugal and Finland, which are now also part of the survey.

READ: Euro zone consumers slash inflation expectations – ECB survey

They join Belgium, Germany, Spain, France, Italy and the Netherlands, raising the poll’s coverage to 96 percent of the euro area’s GDP and 94 percent of its population.

The CES is an important input in the ECB’s deliberations because households’ inflation expectations can affect wage demands and attitudes towards saving and spending.