Nomura Zoom Out When It Comes to Consumer Inflation Expectations

In the wake of this morning’s ECB consumer inflation expectations survey (CES) Nomura note that “the ECB was not hoping for longer-term inflation expectations to rise on the month, notably after the fattening of tails in the latest SPF survey. Moreover, ECBspeak of late, in particular the latest speech by Ms Schnabel, has emphasised inflation expectations are important for determining “the degree of restrictiveness”.”

• “However, some solace can be taken from the fact that both short- and long- term inflation expectations are declining if we look through month-on-month volatility and consider, for example, a three-month moving average of each series. The key risk is that longer-term expectations begin to stabilise around this level, as they have printed approximately here for the past four consecutive prints.”
• “More generally, it is important to caveat that the CES is typically viewed as less important for the ECB due to: (1) it being very lagged and (2) has a short time-series history, having begun only during the pandemic. The ECB tends to pay more close attention to the SPF survey and financial market inflation expectations.”