FRANKFURT — Euro zone consumers reduced their inflation expectations for the next year in June, supporting indications that the most recent episode of runaway price growth is over, a survey from the European Central Bank showed on Tuesday.
The ECB halved interest rates to 2 percent from 4 percent over the past 13 months but kept borrowing costs steady this month, on the premise that inflation is now back at it 2 percent target and would remain there over the medium term.
Consumers’ median expectation for inflation over the next 12 months fell to 2.6 percent in June from 2.8 percent a month earlier, while expectations for three years ahead were steady at 2.4 percent and five years out were unchanged at 2.1 percent, the ECB’s survey of 19,000 adults showed.
Although consumer bets are not always the best gauge of actual price trends, the ECB places great emphasis on expectations and closely watches an array of indicators, since they could impact wage setting, which then influences prices. Consumers’ expectations for nominal income growth over the next 12 months was steady at 1.0 percent last month, with higher income individuals lowering their expectations and lower income groups raising them, the ECB said.
