Post by : Saif Rahman

A recent survey conducted by the European Central Bank (ECB) highlights that consumers within the euro zone foresee minimal fluctuations in inflation. This indicates that price increases are largely under control, suggesting the ECB may not need to pursue further interest rate cuts.

The study, carried out in October with inputs from 19,000 adults across 11 euro zone nations, reveals that inflation expectations for the upcoming year have slightly risen to 2.8%, from 2.7% previously. Projections for medium- and long-term price increases stay steady, with inflation estimated at 2.5% in three years and 2.2% in five years.

These findings demonstrate that the euro zone is successfully maintaining a stable inflation trajectory, a significant achievement for the ECB after dealing with a prolonged period of low inflation, followed by a post-pandemic spike that exceeded 10%. Policymakers regard current figures as evidence that prices are inching back towards the ECB’s target of 2%.

Financial markets responded by lowering the expectations for future interest rate reductions. Analysts now perceive a negligible chance of a decrease next month, and only a one-in-three possibility of easing in the upcoming year. Most economists suggest the ECB's interest rate cycle has likely hit its lowest threshold.

Consumer anticipations regarding income and expenditure also reflect the stable inflation sentiment. Income is expected to grow slightly to 1.2% over the next year, while expected expenditure growth holds steady at 3.5%.

While the ECB keeps the door open for potential further rate cuts, officials are exercising caution. Some believe the bank may have completed its rate reduction phase, particularly after a significant cut to the deposit rate over the year leading up to June.

In essence, the survey indicates that euro zone consumers possess confidence in the stability of prices, offering the ECB a comfortable space to maintain its current policy without the urgency for additional rate changes.

This stable outlook on inflation reassures both households and businesses, implying that the euro zone economy is on track for a steady and manageable trajectory in the coming months.

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