FRANKFURT (Reuters) – Euro zone consumers lowered their near-term inflation expectations in February but projections further out remained unchanged, a new survey by the European Central Bank showed on Tuesday.
Consumers now see headline inflation at 3.1% in the year ahead, below expectations for 3.3% a month earlier, the monthly Consumer Expectations Survey showed.
“They are now at the lowest level since the start of Russia’s unjustified war against Ukraine in February 2022,” the ECB said in a statement.
Three years ahead, inflation is seen at 2.5%, the median result of the ECB’s survey showed.
Actual inflation eased to 2.6% in February from 2.8% in January, Eurostat said earlier, and the ECB expects the rate to keep falling this year before hitting its 2% target in 2025.
This drop in price growth is why policymakers are now openly talking about interest rate cuts and the ECB’s first reduction in the record high 4% deposit rate is now seen for June, with at least two more moves priced in for this year.
Economic growth expectations for the next 12 months also remained unchanged with consumers seeing a mild contraction while the unemployment rate 12 months ahead was also seen steady, the ECB added.
(Reporting by Balazs Koranyi, editing by Ed Osmond)
Comments