Inflation expectations for the next 12 months rose from 2.6% in February to 2.9% in March — the highest level since April 2024.

This is according to the latest European Central Bank (ECB) survey of consumer sentiment.

The three-year inflation outlook also rose by 0.1 percentage point to 2.5%, the highest level since March 2024. At the same time, five-year inflation expectations remained stable for the fourth consecutive month at 2.1%.

The increase in inflation expectations comes before the US imposes tariffs on a number of countries, a move that could trigger a global trade war and hamper economic growth.

Normally, such an increase would be a cause for concern for the ECB, but the survey precedes US trade measures that are drastically changing the global economic environment. The euro has strengthened against the dollar and other currencies, energy prices have fallen, and weaker economic growth is expected — all factors that could limit inflationary pressures. Furthermore, if China starts exporting more cheap goods to Europe due to limited access to the US market, this could lead to even lower inflation.

Due to the deteriorating macroeconomic outlook, the ECB cut its key interest rates again in April and signaled slower economic growth.

Meanwhile, nominal income growth expectations for next year remain unchanged at 1.0%. However, consumer spending growth forecasts are slowing, reaching 3.4% in March compared to 3.5% in February and 3.6% in January, according to a survey of 19,000 consumers in 11 eurozone countries.

Economic growth forecasts for the next 12 months remain negative at -1.2%, while unemployment expectations fell to 10.4% from 10.5% in the previous month.

In addition, consumers expect house prices to rise by 3.1% over the coming year, while their expectations for mortgage interest rates remain unchanged at 4.4%. | BGNES