Eurozone Inflation Expectations Rise; Global Data Curb Easing

The ECB's Consumer Expectations Survey for August 2025 showed median euro‑area 12‑month inflation expectations rose to 2.8% (the highest in three months), five‑year expectations climbed to 2.2% (the highest since August 2022), and three‑year expectations held at 2.5%; consumers expect nominal income growth of 1.1%, weak economic growth of -1.2%, and unemployment of 10.7%. Lower‑income households report slightly higher perceived and short‑term inflation than higher‑income groups, and younger respondents give lower inflation expectations than older groups; more households expect credit conditions to tighten, while consumers foresee a 3.4% rise in home prices and stable mortgage rates. At the same time, US data showed household spending beating forecasts in August, the PCE price index rose to 2.7% year‑on‑year (core PCE 2.9%), and the Atlanta Fed's GDPNow points to near‑4% third‑quarter growth, underscoring persistent price pressures. Separately, headline euro‑area inflation is expected around 2.2% in September and Britain’s longer‑term inflation expectations rose to about 4.1%, according to surveys. Taken together, creeping inflation expectations in Europe and stronger US demand make central banks more cautious about easing policy soon and are increasing political pressure in the US as elevated living costs weigh on sentiment.