Eurozone Consumer Inflation Expectations Rise to 3.1% in April ECB Survey

Recent data from the European Central Bank (ECB) reveals that euro area consumers' short-term inflation expectations have risen to 3.1%, the highest since February 2024, while medium- and long-term expectations remain stable around 2.5% and 2.1%, respectively. This increase in inflation expectations comes amid growing uncertainty and a worsening outlook for economic growth, with expected GDP contraction and a slight rise in unemployment projections. Concurrently, average mortgage interest rates in the euro area are set to continue rising due to the lagged effects of previous ECB rate hikes and the structure of fixed-rate mortgage contracts, which delays the impact of policy rate cuts on household borrowing costs. This persistent increase in mortgage costs is expected to weigh on private consumption until at least 2030. The combination of higher inflation expectations, increased mortgage costs, and deteriorating growth and employment outlooks paints a challenging economic picture for the euro area in the coming years. These findings highlight the complexity of monetary policy transmission and its varying effects on consumer behavior and economic prospects.