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Longer-Term Consumer Inflation Expectations Remain Elevated

EUROZONE DATA
The main highlight of the inflation expectations section of the ECB's May CES survey is that near-term inflation expectations measured by the 12-month ahead series (5.1% vs 5.3% prior on mean, 3.9% vs 4.1% prior on median) continue to make progress alongside falling observed headline inflation. Both were the lowest since Feb 2022 (Russian invasion of Ukraine).
  • But longer-term inflation expectations (3 years out) have flattened out at elevated levels, with 3Y median at 2.5% for the 2nd consecutive month and basically where it's been since the start of the year, absent a one-off spike to 2.9% in March. 3Y mean has likewise steadied out but in the high 3% area (3.8-4% each month this year apart from 4.3% in March).
  • Both remain above the ECB's target and thus will be seen by hawks as a piece of evidence that there is more work to do to bring longer-term expectations back to the 2% (median) and 3% (mean) at which they were firmly anchored as recently as mid-2021.

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