ECB survey: consumer inflation expectations for year ahead fall to 3.5%

Euro area consumers' median inflation expectations for the year ahead fell to 3.5% in May from 4.0% in April, the European Central Bank said on 26 June, publishing the results of its monthly Consumer Expectations Survey.

Longer-horizon expectations were unchanged, per the release: 2.9% at three years ahead and 2.4% at five years ahead. Perceptions of inflation over the past 12 months held steady at 4.0%. The fieldwork ran from 7 May to 1 June across 11 euro area countries, with roughly 19,000 participants.

The survey's broader readings were mixed, per the ECB. Expectations for economic growth over the next 12 months improved to -1.7% from -2.2%, though they remain firmly negative, while the expected unemployment rate a year ahead edged up to 11.3% from 11.2%, against a perceived current rate of 10.7%. Expected income growth rose to 1.0% from 0.8%, expected spending growth eased to 3.8% from 4.3%, and expectations for home price growth slipped to 3.6% from 3.7%, with expected mortgage rates unchanged at 4.9%.

Reports of tightening access to credit reached their highest level since February 2024, per the release — a hardening in perceived financing conditions that sits alongside the still-negative growth outlook.

Background

The Consumer Expectations Survey, launched in 2020, is the ECB's principal window on how households — as distinct from professional forecasters and markets — perceive prices, incomes and credit. The central bank watches the survey closely because household expectations shape wage demands and spending, and because their de-anchoring from the ECB's 2% medium-term target would make inflation harder to bring down at any given policy stance.

The May readings describe expectations that are moving in the right direction at the one-year horizon while remaining well above target at every horizon: even the five-year median of 2.4% sits above 2%, and the gap between perceived inflation of 4.0% and the target underlines how far household experience diverges from the ECB's objective. Consumer surveys also typically run above measured inflation, a persistent bias the ECB acknowledges in interpreting levels as against month-to-month changes.

What comes next

The June survey round, collected in fieldwork that would capture reactions to the energy-price volatility of early summer, is the next reading on whether May's decline in near-term expectations extends. The survey feeds the Governing Council's assessment ahead of its coming policy meetings, where the persistence of above-target expectations — and the reported tightening in credit access — both bear on the rate path.