(Bloomberg) -- Inflation expectations of consumers in the euro area inched higher, according to the European Central Bank, though the increase is unlikely sufficient to stop officials from pushing ahead with interest-rate cuts.
While prices are seen advancing 2.8% over the next 12 months — the same as in June — the measure for three years ahead rose to 2.4% from 2.3%, the ECB said Friday in a monthly poll.
Expectations about where prices are headed play a key role in driving inflation itself, with policymakers still looking for conclusive evidence that their 2% target will be met late next year as currently planned.
Fresh quarterly projections are due when policymakers next convene to set interest rates in September. Investors are betting on a second cut in borrowing costs, with August inflation likely to have moderated following the previous month’s surprise uptick.
Backing that view, data Thursday showed negotiated wages across the 20-nation euro region slowed markedly in the second quarter.
The economy, meanwhile, is struggling. Despite another quarter of outperformance between April and June, sentiment is souring with Germany remaining the primary trouble spot.
According to the ECB’s poll, consumers became more pessimistic on the economy, foreseeing a 1% contraction over the next 12 months compared with -0.9% previously.
The Consumer Expectations Survey also showed:
- Expectations for the unemployment rate 12 months ahead remained at 10.6%
- Nominal incomes are seen growing 1.1% — down from June’s 1.4%
- Expectations for nominal spending growth over the next year were 3.2%, compared with 3.3% before
- Consumers expect the price of their home to increase by 2.6% over the next 12 months — down from June’s 2.7%
- Expectations for mortgage interest rates stayed at 4.8%
--With assistance from Barbara Sladkowska.
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