Median inflation expectations in the Eurozone rose in March 2025, reflecting growing concerns that price pressures may prove more persistent than previously anticipated.
Eurozone inflation expectations edge higher
The 12-month inflation outlook climbed by 0.3 percentage points to 2.9%, reaching its highest level since April 2024. This increase suggests that households are becoming more cautious about short-term price dynamics, possibly influenced by recent energy volatility, food price stickiness, and ongoing geopolitical uncertainty affecting global supply chains.
Expectations for inflation three years ahead also edged up, rising by 0.1 percentage point to 2.5%, the highest level since March 2024. The uptick indicates that the public is increasingly skeptical that inflation will return to the European Central Bank’s 2% target in the medium term. While still relatively anchored, the steady drift upward in medium-term expectations may complicate policymaking, as it signals emerging doubts about the effectiveness or speed of monetary normalization.
Five-year inflation expectations unchanged
Meanwhile, five-year inflation expectations—reported for the first time in this cycle—remained unchanged at 2.1% for the fourth consecutive month. This stability suggests that longer-term inflation credibility remains intact, with respondents still broadly confident in the ECB’s ability to bring inflation back to target over time, despite short- and medium-term fluctuations.
Perceived inflation over the past 12 months held steady at 3.1%, the lowest level recorded since September 2021. This may indicate that actual inflation dynamics are gradually aligning with consumer perceptions, following several quarters of elevated price growth that had significantly outpaced wage increases. Notably, inflation uncertainty for the year ahead also remained unchanged, holding at its lowest level since January 2022. This suggests that while consumers expect some continued upward price movement, they see the path forward as more predictable and less volatile than in previous periods.
Demographic breakdowns
Demographic breakdowns revealed that younger respondents (aged 18–34) continued to report lower inflation perceptions and expectations than older age groups (35–54 and 55–70). However, the gap between age cohorts has narrowed slightly, reflecting either a more uniform exposure to price increases or a broader dissemination of economic information. Younger households, which tend to be more digitally connected and less reliant on traditional price-sensitive consumption patterns, may still be somewhat buffered from the full impact of inflationary pressures, though their outlook is gradually converging with that of older generations.
Overall, the data underscores a cautious but shifting inflation narrative in the Eurozone—where headline inflation has moderated, but consumer expectations remain sticky, particularly in the near term. The ECB will likely weigh these evolving sentiment trends as it calibrates future policy moves, particularly amid ongoing debates over the timing and extent of rate cuts later in the year.
