European Central Bank: consumers are more optimistic about inflation

Eurozone consumers expect lower inflation and higher economic growth in the coming months, according to the European Central Bank’s (ECB) Survey of Consumer Expectations.

The ECB has announced the results of its February 2023 Consumer Expectations Survey.

Consequently, the average inflation expectation of consumers in the Eurozone over 12 months decreased from 4.9 percent to 4.6 percent. Consumer inflation expectations for the next 3 years also decreased from 2.5 percent to 2.4 percent.

UNEMPLOYMENT IS EXPECTED TO BE 11.5 PERCENT

It should be noted that the economic growth expectations of consumers in the region are more optimistic than the previous month, while the economic growth expectation of consumers for the next 12 months, which was minus 1.2 percent in January, rose to minus 0.9 percent in February.

Consumers expect unemployment to average 11.5 percent over the next 12 months. This rate was forecast as 11.6 percent in January.

The ECB Consumer Expectations Survey is published monthly. The survey is carried out by interviewing some 14,000 people from Germany, France, Italy, Spain, the Netherlands and Belgium, which account for around 85 percent of the euro zone’s GDP.

Inflation expectations play an important role in central bank monetary policy. How far and how fast the ECB will go in raising interest rates will determine the inflation outlook.

A RECORD IN CORE INFLATION

While the ECB has raised the main interest rates 6 times in a few months, the interest rate on deposits, which is the determining factor in financial markets, is currently at the level of 3.5 percent.

ECB President Christine Lagarde had left the door open for an interest rate hike taking into account high inflation for the meeting to be held in early May.

Advocates of further monetary policy tightening refer mainly to core inflation, which is net of energy and food prices. Core inflation hit a new record of 5.6 percent in the euro area in February.

On the other hand, inflation in the Eurozone remains “stubbornly” high.

According to data from the European Statistical Office (Eurostat), annual inflation in the Eurozone, which was 8.5% in February, was 6.9% in March due to the fall in energy prices, despite to the ECB’s most aggressive monetary policy tightening in its history. .

The ECB, which is targeting 2 percent inflation over the medium term, will not be able to meet this target for a long time, according to its forecasts. (AA)