Inflation expectations in the Eurozone increased “significantly” in March. This is what emerges from the ECB survey according to which in the next 12 months expectations are for inflation to rise to 5% from the 4.6% of the February survey. Expectations are also on the rise over a three-year period, to 2.9% from 2.4% in the previous survey and far from the ECB’s target of 2%. This prospect could push the ECB to continue tightening rates, analysts explain.
Uncertainty prevails
Uncertainty about inflation expectations over the next 12 months has reached its highest level since the start of the survey in April 2020. As regards economic growth expectations over the next 12 months, there is a slight decrease to -1 .0%, from -0.9% in February.
In line with these lower expectations for economic growth, expectations for the unemployment rate over the next 12 months have increased to 11.7%, up from 11.5% in February.
Crucial indicator
It CES (Consumer Expectations Survey) is a monthly online survey of around 14,000 people from Belgium, Germany, Spain, France, Italy and the Netherlands. It is one of the indicators used by ECB policy makers in their monetary policy choices.
Nagel (Bundesbank): tightening could continue after the summer
The ECB’s monetary tightening maneuver may not end in the summer and once rates have reached their terminal point, they will have to stay there for a long time. This is what Joachim Nagel, president of the Bundesbank and member of the ECB Governing Council, said in an interview with Bloomberg Television in response to a question whether the cost of money could rise again in September. “Nothing can be ruled out,” Nagel said that he is in Japan to take part in the meeting of G7 finance ministers. “Inflation is still very sticky,” Nagel said, adding that price hikes are “a very stubborn phenomenon.”