The Eurozone inflation forecast has risen for a second consecutive month, intensifying pressure on the European Central Bank (ECB) ahead of its key monetary policy decision. According to the ECB’s April Consumer Expectations Survey, respondents expect prices to grow by 3.1% over the next year, significantly exceeding the bank’s 2% target. The news comes as the region’s economic growth prognosis deteriorates, challenging efforts to curb inflation without impeding recovery. As policymakers consider a rate decrease, markets and experts are looking for evidence of a shift in the ECB’s stance.
Inflation Forecast Rises to 3.1%
Bloomberg reports that euro-area consumers’ short-term inflation expectations rose for a second consecutive month, according to the ECB’s latest survey. The Consumer Expectations Survey, released Wednesday, shows consumers now expect prices to rise 3.1% over the next year, up from 2.9% in March. This marks the highest inflation expectation since February 2024, highlighting persistent price concerns despite broader efforts to stabilize the eurozone economy.
Despite rising short-term estimates, medium- and long-term inflation expectations remained steady, reflecting continued confidence in price stability over time. Respondents forecast inflation at 2.5% over three years and 2.1% over five years, consistent with previous months’ projections.
The ECB remains confident it can return inflation to its 2% target, supported by early May data showing modest price growth. In France, consumer prices rose just 0.6%, reinforcing expectations of subdued inflation across other major eurozone economies. Analysts predict similarly soft readings when national inflation figures are released later this week across key member states. Comprehensive data covering all 20 eurozone countries will be published on June 3, offering broader insight into regional inflation trends.
Weak wage growth, declining energy prices, and a stronger euro have helped ease underlying inflation pressures across the eurozone. However, escalating geopolitical risks, especially potential new U.S. tariffs under President Donald Trump, have added fresh uncertainty to the economic outlook.
Many analysts see these external threats as strengthening the argument for further monetary easing by the European Central Bank.
Weak Outlook and Trade Risks Shake Confidence
Despite a few indicators pointing to increased business and industrial optimism, eurozone consumers’ overall economic outlook has deteriorated. According to the ECB survey, respondents now expect the economy to decrease by 1.9% over the next 12 months, a considerable drop from the previous month’s projection of a 1.2% decline. Unemployment predictions also increased somewhat, from 10.4% to 10.5%.
Moreover, this subdued sentiment is being compounded by rising uncertainty, particularly as geopolitical risks intensify. Recent trade threats by Trump aimed at the European Union have introduced a new layer of uncertainty, potentially impacting inflation forecasts and weakening confidence in the region’s recovery.
The ECB survey, which included 19,000 adults from 11 eurozone nations, found that inflation uncertainty for the coming year has reached its highest level since June 2024. While short-term inflation fears have increased, the larger economic uncertainty highlights the difficult balancing act that ECB policymakers face.
Conclusion
Rising European inflation forecasts underscore the growing gap between consumer sentiment and the European Central Bank’s long-term price stability target. As economic growth projections weaken and inflation risks remain, the ECB faces a critical challenge in calibrating an effective policy response.
Whether the ECB proceeds with a rate cut or delays action, its decision will significantly impact markets, households, and eurozone stability. Investors and policymakers now closely watch the ECB’s June policy meeting for critical signals on the bank’s next strategic move.
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