(Bloomberg) -- Inflation expectations of consumers in the euro zone continued declining in September, according to the European Central Bank — giving policymakers further confidence that they may reach their target sooner than previously thought.
Prices are seen rising 2.4% over the next 12 months, down from 2.7% in August and the least since September 2021, the ECB said Friday in its monthly poll. The gauge for three years declined to 2.1% from 2.3% — the lowest since Russia invaded Ukraine and just above the 2% goal.
With expectations about future price developments playing a key role in driving inflation, the results support officials who’re advocating a quicker reduction in interest rates. Policymakers gathering in Washington this week for the International Monetary Fund’s annual meetings are debating whether an outsized reduction may even be warranted to avoid falling behind the curve.
Inflation’s recent tumble to 1.7% has nudged investors to step up bets on monetary easing. After the first back-to-back rate cuts of this cycle, they now predict a flurry reductions, culminating with a deposit rate of 2% mid-next year.
The ECB’s survey showed consumers remaining downbeat on the economy, foreseeing a 0.9% contraction over the next 12 months — the same as the month before.
The poll also showed:
- Expectations for the unemployment rate 12 months ahead rose to 10.6% from 10.4%
- Nominal incomes are seen growing 1.3%, up from 1.2%
- Expectations for nominal spending growth over the next year remained stable at 3.2%
- Consumers expect the price of their home to increase by 2.8% over the next 12 months
- Expectations for mortgage interest rates declined slightly to 4.7%
--With assistance from Barbara Sladkowska.
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