Eurozone Inflation Expectations Remain Elevated at 4%

The March spike saw expectations jump from 2.5% in February, marking the largest monthly increase since early 2022, when Russia’s invasion of Ukraine disrupted energy markets. The article attributes this surge to the escalating Iran war and the blockade of the Strait of Hormuz, which intensified fears of broader inflationary pressures.

Longer-term expectations also rose in March, with three-year forecasts climbing to 3.0% from 2.5% and five-year expectations edging up to 2.4% from 2.3%. In April, while short-term expectations held firm, three-year inflation forecasts slightly decreased to 2.9% from 3.0%, and five-year expectations remained unchanged at 2.4%.

Economic growth expectations for the next 12 months became more negative, decreasing to -2.2% from -2.1%, and consumers’ nominal income growth expectations decreased to 0.8% from 1.2%. Conversely, expectations for the unemployment rate 12 months ahead improved, decreasing to 11.2% from 11.3%.

The upward trend in expectations in March was consistent across income groups, with lower-income respondents reporting slightly higher near-term expectations, while younger respondents (18-34) continued to anticipate lower inflation than older age groups.