Eurozone inflation expectations fall in January: ECB

ISTANBUL

Short-term inflation expectations among euro area consumers declined in January, the European Central Bank (ECB) said on Friday, citing its latest Consumer Expectations Survey.

Based on responses from about 19,000 participants, consumers’ average inflation expectation for the next 12 months fell to 2.6% from 2.8%, signaling easing concerns about price pressures at the start of the year.

The ECB said lower-income households continue to perceive higher inflation than higher-income groups, a trend that has persisted since 2023. Uncertainty surrounding 12-month inflation expectations remained unchanged in January.

Meanwhile, three-year-ahead expectations were stable at 2.6%. Five-year-ahead expectations edged down to 2.3% from 2.4%.
Consumers’ expectations for euro area economic growth remained negative at minus 1.1%, while income growth expectations rose to 1.2% from 1.1%.

Euro area inflation slowed to 1.7% in January, falling below the ECB’s 2% medium-term target, giving policymakers more room to maneuver.

After cutting its deposit rate eight times since June 2024, the ECB has paused further reductions in recent meetings. Markets expect the deposit rate, currently at 2%, to remain unchanged in the coming months.

The monthly survey covers Germany, France, Italy, Spain, the Netherlands and Belgium, representing about 85% of the euro area’s gross domestic product. Inflation expectations are considered a key indicator guiding the ECB’s monetary policy decisions.