ECB Survey: Inflation in the Eurozone Remains High – Consumers Skeptical

Energy Prices as Inflation Drivers

The actual inflation rate in April was 3.0 percent, significantly above the ECB's target of two percent. The central bank aims for a stable inflation rate of exactly this value in the medium term.

The main drivers for the persistently high price increases are considered to be the sharply increased energy costs. These rose sharply after the start of attacks by the United States and Israel on Iran on February 28.

Consumers feel the energy price increases particularly at the pumps in the form of higher fuel prices. This is immediately reflected in their inflation expectations.

ECB Faces Difficult Interest Rate Decision

Financial markets expect the ECB to raise key interest rates for the first time this year at its council meeting on June 11. The central bank must readjust its interest rate path in view of inflation risks and the economic consequences of the Iran war.

The monthly survey on consumer inflation expectations is commissioned by the ECB and conducted online. Around 19,000 consumers from eleven Euro countries, including Germany, Spain, France, and Italy, are surveyed.

Background to the Survey

The latest survey took place between April 2 and May 4. The ECB uses the results as a supplement to other data sources for its monetary policy analyses.

The persistently high inflation expectations present the central bank with a dilemma: on the one hand, it must combat inflation; on the other hand, the war threatens additional economic risks for the Eurozone.