Nomura: Euro Area Consumer Inflation Expectations Sidestep

In light of the latest ECB consumer inflation expectations data Nomura note that "the continued downward trend in one year ahead inflation expectations is exactly what the ECB will have been looking for, and importantly, longer-term median expectations have not increased, even if they have not continued to decline. The ECB will likely want to see three year ahead expectations fall in future editions of the survey, in order to ensure expectations remain well anchored."

• "The key risk is that longer-term expectations begin to stabilise around this level, above the ECB's target, as we are potentially seeing longer-term U.S. inflation expectations do according to the Michigan survey. That said, it's far too early to draw such a conclusion from these data."
• "It is important to caveat that in our view the ECB is unlikely to take too much from this survey as: (i) it is very lagged and (ii) has a short time-series history having begun only during the pandemic. The ECB, in our view, will pay more close attention to the SPF survey and financial market inflation expectations."