The inflation in the eurozone fell in June but remained above the ECB's 2% target. At the same time, ECB officials are considering whether to continue raising interest rates. On Tuesday, the ECB said in its monthly survey that consumers' inflation expectations for the next 12 months fell to 3.4% from 3.9% in May. At the same time, expectations for the next three years also fell from 2.5% to 2.3%.
The exact figure for inflation will be announced ahead of a September interest rate meeting, at which ECB President Christine Lagarde said will decide whether to raise the deposit rate for the tenth time in a row or pause it. Moreover, ECB research last week showed that core inflation may have peaked.
Market indicators measuring price growth, however, are hitting record highs. A measure of future inflation reached its highest level since 2010 on Monday, pointing to an average growth rate of 2.67% between 2028 and 2033.
Philip Lane, the ECB's chief economist, said that while price growth in the euro zone would not hit the ECB's target until sometime in 2025, it would slow sharply later this year.
If the inflationary pressures in the market start to reverse, that is, the inflation trend starts to decline, it will help to solve the slowdown in the European region led by Germany. Fabio Panetta, executive member of the European Central Bank, warned last week that monetary policy must be cautious in dealing with inflation to ensure that inflation is contained without harming economic growth.
Consumers were slightly less pessimistic about the economy, the ECB survey showed, expecting the economy to contract by 0.6% over the next 12 months, compared with a 0.7% forecast in May.
Additionally, the survey noted:
Unemployment is currently at a historic low and is expected to hit 11% in a year's time;
Nominal income is expected to grow by 1.2%, the same result as in the previous survey;
Consumers expect home prices to rise 2.1 percent over the next 12 months and to stabilize near two-year lows;
Mortgage rate expectations for the next 12 months edged down to 5% from 5.1% in May.
