Eurozone Inflation Fears Cool in January
Drawing on responses from approximately 19,000 participants in its latest Consumer Expectations Survey, the ECB reported that average 12-month inflation expectations declined to 2.6% from 2.8% — a meaningful shift that suggests growing consumer confidence in price stability heading into the year.
Longer-term expectations told a similarly calmer story. Three-year-ahead projections held steady at 2.6%, while five-year forecasts edged lower to 2.3% from 2.4%. Uncertainty surrounding near-term inflation expectations remained unchanged in January.
Yet the data also laid bare a persistent social divide. The ECB noted that lower-income households continue to perceive inflation as significantly higher than their wealthier counterparts — a gap that has endured since 2023 and underscores the uneven burden of price pressures across income groups.
On the broader economy, consumers remained pessimistic, with euro area growth expectations holding negative at minus 1.1%. Income growth expectations, however, ticked up slightly to 1.2% from 1.1%, offering a sliver of optimism.
The survey results arrive as actual euro area inflation slowed to 1.7% in January, dipping below the ECB's 2% medium-term target and giving policymakers additional flexibility. Having cut its deposit rate eight consecutive times since June 2024, the ECB has since paused, with markets broadly anticipating the rate will remain at its current level of 2% in the months ahead.
The monthly survey spans Germany, France, Italy, Spain, the Netherlands, and Belgium — six economies collectively representing roughly 85% of the euro area's gross domestic product — making it one of the most comprehensive gauges of consumer sentiment on the continent.
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