FRANKFURT — Consumers’ faith in the European Central Bank’s ability to deliver medium-term price stability has waned further, raising pressure on the central bank to act aggressively to rein in prices.
The central bank’s consumer expectations survey showed today that inflation expectations for the three years ahead rose to 3 percent in July from 2.8 percent in June. The ECB’s aims to deliver 2 percent inflation.
The median expectation for inflation over the next 12 months remained unchanged at 5.0 percent.
Inflation expectations becoming unanchored will add pressure on the ECB to act aggressively to get price spikes under control. Policymakers have previously pointed to well-anchored inflation expectations for one reason allowing for incremental moves.
The ECB’s Governing Council meets on Thursday for its next interest rate decision. Expectations have shifted increasingly towards the ECB delivering a jumbo rate hike of 75 basis points next week, after headline inflation topped expectations once again, hitting a record 9.1 percent in August.