Consumer expectations for inflation in the coming year in the euro zone increased in October, but projections for the next three years remained stable at a rate that is still much higher than the ECB’s 2% objective, according to the ECB’s monthly poll released on Wednesday.
Due to skyrocketing energy and food prices this year, inflation spiked, and the ECB has been hiking rates at a record pace to at least moderate longer-term expectations.
Based on a survey of roughly 14,000 people in six of the largest countries in the euro zone, the ECB reported that median inflation expectations for the next 12 months increased to 5.4% in October from 5.1% in September, while expectations for inflation three years from now remained unchanged at 3.0%.
The rate of inflation reached a record high of 10.6% in October and fell to 10% last month, although early in 2023, it is anticipated that the rate of fall would be modest before disinflation picks up speed in the second half of the year.
According to the ECB, consumers’ perceptions of growth and employment increased at the same time that the inflation outlook increased.
Expectations for economic growth over the next 12 months dropped from -2.4% in September to -2.6%, although unemployment is anticipated to increase and income growth is predicted to lag inflation.