Consumer Inflation Expectations Reverse In April After March's Jump

While the inflation component of the ECB's Consumer Expectation Survey isn't the most important driver of the Governing Council's outlook, the reversal lower in April's reading is still somewhat meaningful (as evidenced by the modest dovish market reaction) insofar as it suggests that expectations aren't becoming unanchored.

• ECB officials including Chief Economist Lane have cited this release as a consideration in policy-setting, while the May meeting accounts noted some concern over the March uptick ("The upward movement in inflation expectations reflected in the ECB Consumer Expectations Survey also warranted ongoing monitoring.").
• Onto the data: median 12-month ahead inflation expectations fell to 4.1% from 5.0% in March, with 3-years-ahead falling to 2.5% from 2.9%. That compares to a 0.4pp jump in March for 12-month expectations/0.5pp for 3-year. Additionally, uncertainty about year-ahead inflation also fell.
• The mean measure was higher than median, at 5.3%, but that's down from above 6.3% prior, 8% in 4Q 2022, and like the median measure fell to the lowest since the start of the Russia-Ukraine War in February 2022.
• Both remain well above pre-2022 levels, when median/mean were mostly anchored closer to 2% / 3%, respectively, but there is at least progress in the downward direction, and expectations are below the "perceived" prior inflation levels, suggesting that consumers see disinflation in the pipeline from very high rates.

Source: ECB CES