Euro zone consumers expect lower inflation, sluggish housing prices – ECB poll

FRANKFURT (Reuters) – Euro zone consumers expect inflation to keep slowing in the next months and years but remain pessimistic about their purchasing power and house prices, a European Central Bank survey showed on Tuesday.

The ECB’s monthly Consumer Expectations Survey added to evidence that the central bank’s steepest ever streak of interest rate hikes was slowly starting to succeed in preventing the current, high rate of inflation from taking root in people’s minds.

The median respondent in the June edition of the survey expected inflation to average 3.4% over the next 12 months, down from 3.9% a month earlier and extending a decline that started in late 2022 as actual price growth began to slow.

Consumers also cut their expectations for inflation three years ahead to 2.3% from 2.5% in May – inching closer to the ECB’s 2% target.

The survey also showed that consumers continued to expect their income to grow much more slowly – at 1.2% – than inflation and spending over the next 12 months, implying an expected lowering of living standards and savings.

The mean respondent was also as pessimistic as they have been in the past two years about housing prices, which they expected to grow by just 2.1% over the next year.

An article accompanying the survey showed that households’ perceptions about housing have deteriorated markedly since mid-2021 due to expectations of higher mortgage rates and inflation as well as lower economic growth.

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