FRANKFURT (Reuters) – Euro zone consumer expectations for inflation over the next three years have risen slightly, a new survey from the European Central Bank (ECB) showed on Tuesday, bolstering fears that lower inflation price is not sufficient to achieve the institution’s objective.

The ECB has hiked rates at each of its past nine monetary policy meetings to their highest levels in two decades, but officials are questioning the possibility of taking a break in September, given the the deterioration of the economic outlook.

The ECB survey showed consumer expectations for three-year inflation rose to 2.4% in July from 2.3% in June, above the 2% target. of the ECB.

Median inflation expectations for the next 12 months remained unchanged at 3.4%, ending a steady downward trend since the spring.

The ECB has predicted a rapid slowdown in price growth in 2023, but a much slower decline in 2024, with some policymakers even warning that the “home stretch” of disinflation could be so long that price growth could rebound and stay beyond the goal.

Market expectations call for long-term inflation of around 2.6%, indicating that investors lack confidence in the ECB’s willingness to put enough pressure on the economy to reduce the rise in prices. price.

Consumers continue to believe an economic contraction is ahead, and growth forecasts for the next 12 months have been revised down from -0.6% to -0.7%, according to the ECB.

Unemployment expectations, however, remained unchanged, although consumers saw a slight slowdown in nominal income growth.

“The decline in expected nominal income growth was driven mainly by respondents in the lowest income quintile,” the ECB said.

Markets estimate only 25% chance of a rate hike on September 14 but still expect another 25 basis point hike before year-end, ahead of rate cut expected in mid-2024.

(Report Balazs Koranyi, Diana Mandiá, edited by Blandine Hénault)

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