EUROZONE DATA: ECB Consumer Inflation Expectations Steady - a Lull Before the Storm? (2/2)

The ECB Consumer Expectations Survey saw some signs of improvement from the July slump. However, with CPI surging to 10.0% in the September flash, upticks in optimism appear fleeting.

• Inflation expectations remained unchanged at 5.0% (12-month) and 3.0% (3-year) outlooks, both substantially lower than the current perceived rate of CPI. Uncertainty regarding inflation stabilised, although the fresh September CPI surge is likely to unanchor this.
• The ECB is due to meet at the end of the month. With 70bp is currently priced by markets, a 75bp hike is a solid contender if the ECB continues to see inflation concerns as outweighing the imminent winter recession.
• Executive Board member Isabel Schnabel, who has also advocated keeping a much closer policy tie to actual inflation outcomes as well as expectations, will have noticed that consumers have correctly assessed the rising level of current prices gains, with perceived inflation over the last 12 months seen at 8.0%, edging up from 7.9% in July.