ECB sees higher inflation expectations
- The European Central Bank said euro-area consumers in March sharply raised inflation expectations and turned gloomier on growth and unemployment in its latest survey. - One-year inflation expectations jumped to 4.0% from 2.5%, while three-year expectations rose to 3.0%; expected economic growth fell to minus 1.2%. - The survey landed as war-driven energy costs cloud rate-cut plans and growth forecasts from India to Africa. (ecb.europa.eu)
Euro-area consumers told the European Central Bank in March that they expect faster inflation and weaker growth at the same time. (ecb.europa.eu) The European Central Bank’s Consumer Expectations Survey, published April 28, showed median inflation expectations for the next 12 months rose to 4.0% from 2.5% in February. Three-year expectations climbed to 3.0% from 2.5%, and five-year expectations edged up to 2.3% from 2.1%. (ecb.europa.eu) The same survey showed expected economic growth over the next 12 months fell to minus 1.2% from minus 1.1%, and the expected unemployment rate in 12 months increased to 10.5% from 10.4%. Consumers also expected mortgage rates to rise to 5.1% from 4.9%. (ecb.europa.eu) Those responses matter because central banks watch inflation expectations for signs that an energy shock is spreading from fuel bills into wages, prices and borrowing costs. Reuters reported policymakers are concerned that higher energy costs could make rapid price growth self-perpetuating. (reuters.com) (ecb.europa.eu) The timing is important. The European Central Bank said 97% of responses in its February survey were collected before the war in the Middle East began on February 28, 2026, making the March results one of the first cleaner reads on how households reacted after the shock. (ecb.europa.eu 1) (ecb.europa.eu 2) Outside the euro zone, the same oil shock is feeding into growth downgrades. Business Today reported Indian government sources said the fiscal year 2027 growth forecast may be cut to 6.3% to 6.5% from 6.8% to 7.2% because of the Iran war and higher crude prices. (businesstoday.in) In sub-Saharan Africa, Ecofin Agency reported the International Monetary Fund lowered its 2026 growth forecast to 4.3% from 4.6%, citing higher energy, fertilizer and shipping costs linked to Middle East tensions. Nigeria and South Africa were among the economies facing downward revisions. (ecofinagency.com) For the European Central Bank, that leaves a familiar problem in a new form: inflation expectations are moving away from the 2% target just as households say growth is weakening. The next policy steps will hinge on whether that March jump fades with energy prices or starts showing up in actual inflation data. (ecb.europa.eu) (reuters.com)
