The Eurozone's median inflation expectations for the next 12 months dropped to 2.6% in January 2025, a decrease from the five-month high of 2.8% seen in December 2024. This decline reflects a continued sense of stabilization in inflationary pressures within the region.
Eurozone inflation expectations ease in January
In contrast, the three-year inflation expectations remained unchanged at 2.4%, signaling that, despite the recent short-term fluctuations, long-term inflation expectations remain anchored below the perceived past inflation rate. The latter, which stood at 3.4% in January 2025, slightly decreased from 3.5% in December 2024. This suggests that the inflationary pressures of the past year are still fresh in the public's mind, but there is a recognition that future inflation may be more moderate.
How expectations change across income groups
Notably, inflation perceptions and expectations remained largely consistent across various income groups, although lower-income respondents indicated slightly higher expectations for future inflation compared to their higher-income counterparts. This difference might reflect concerns about the impact of price changes on daily living costs, which tend to be more pronounced for lower-income households. Similarly, younger respondents (aged 18-34) continued to report lower inflation expectations than older age groups, though the gap between them has narrowed in comparison to previous years. This shift could suggest that younger individuals are becoming more attuned to economic realities and may have adjusted their inflation outlook in response to evolving market conditions.
Inflation uncertainty remains stable
Lastly, inflation uncertainty, a measure of how volatile inflation expectations are, remained stable for the sixth consecutive month, holding at its lowest level since February 2022. This prolonged period of low inflation uncertainty signals a growing sense of confidence among the public about the trajectory of inflation, as well as the European Central Bank's ability to manage it effectively. It suggests that while inflation remains a topic of concern, expectations for unpredictable changes have diminished significantly.
