Consumer inflation expectations dip in August, ECB says

Disappointing economic indicators, weaker-than-expected pay increases in Q2 are fuelling speculation that officials earlier than anticipated

    • The European Central Bank has lowered rates twice this year, and has signalled further reductions without giving precise guidance on the timing.
    • The European Central Bank has lowered rates twice this year, and has signalled further reductions without giving precise guidance on the timing. PHOTO: AFP
    Published Fri, Sep 27, 2024 · 04:38 PM

    INFLATION expectations of consumers in the euro area fell in August, said the European Central Bank (ECB), bolstering the growing case for another reduction in interest rates next month.

    Prices are forecast to advance 2.7 per cent over the next 12 months, down from 2.8 per cent in July and the lowest level since September 2021, ECB said on Friday (Sep 27) in its monthly poll.

    The gauge for three years also dipped to 2.3 per cent, from 2.4 per cent.

    Expectations about future price developments play a key role in driving inflation, with policymakers still looking for more evidence that their target of 2 per cent will be met sustainably late next year as currently planned.

    While inflation is expected to ease to even below that goal in September, the trend is likely to reverse in the final months of the year due to base effects.

    Data earlier on Friday showed price gains moderated more than anticipated this month in France and Spain, coming in well below 2 per cent in each country.

    The ECB has lowered rates twice this year, and has signalled further reductions without giving precise guidance on the timing.

    This week’s disappointing indicators for economic activity in the 20-nation bloc and weaker-than-expected pay increases in the second quarter have fuelled speculation that officials in the euro area may lower borrowing costs again when they meet in less than three weeks, instead of waiting until December.

    The ECB’s survey showed consumers becoming slightly less pessimistic on the economy, foreseeing a 0.9 per cent contraction over the next 12 months, compared with a 1 per cent retreat previously. BLOOMBERG

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