Eurozone consumers have significantly lowered their inflation forecasts for the coming year, with the median expectation for inflation over the next 12 months falling to 3.6% in June, down from 4.0% in May, according to the latest European Central Bank Consumer Expectations Survey.
The decline in perceived inflation over the previous 12 months also moderated, dropping to 3.6% from 4.0% in the prior month.
This synchronized drop in both backward-looking perceptions and forward-looking expectations suggests that households are becoming less concerned about persistent price pressures, a key variable for the ECB’s monetary policy calibration.
The shift in sentiment aligns with broader disinflationary trends in the euro area, providing additional data points for policymakers assessing the durability of price stability.
As consumer confidence regarding inflation improves, the risk of wage-price spirals diminishes, potentially allowing the ECB to maintain its current easing trajectory without abrupt tightening.
Markets are likely to interpret the softer expectations as supportive of a dovish stance, particularly if upcoming inflation data confirms the trend.