Overview
- The European Central Bank’s Consumer Expectations Survey published on Friday showed euro‑area one‑year inflation expectations fell to 3.5% in May from 4.0% in April, easing a surge tied to March energy shocks.
- Three‑ and five‑year expectations stayed near 2.9% and 2.4% respectively, indicating longer‑run inflation views remain largely anchored close to the ECB’s target.
- U.K. household one‑year expectations also cooled to 4.7% in May and the Bank of England held its Bank Rate at 3.75% in June, citing eased expectations and lower energy costs.
- U.S. data have moved in the opposite direction for policy risk because headline and core inflation readings kept pressure on the Federal Reserve to consider further tightening.
- Markets still price one to two more euro‑area hikes and the path of energy prices is the key risk that could reverse the recent moderation and tighten policy again, a shift that would hit household budgets and borrowing costs.