FRANKFURT — A survey released Monday by the European Central Bank offers some encouraging signs that inflation pressures in the euro zone may be easing, with businesses expecting slower growth in both selling prices and wages over the next year.
Inflation in the euro zone is currently hovering near 3%, driven largely by high energy costs — well above the ECB’s target of 2%. Central bank officials have been concerned that sustained price increases at this level could push inflation expectations higher and spark excessive wage demands, creating a difficult-to-reverse cycle of rising prices.
The ECB’s Survey on the Access to Finance of Enterprises found that, on average, companies are projecting more restrained growth across several key economic measures. As the ECB put it: “On average, firms expected selling prices, non-labour input costs and wage expectations to rise more moderately over the next 12 months.”
More than 5,000 businesses took part in the survey. Those firms now anticipate selling prices will climb 3.2% over the next year, a drop from the 3.5% projection recorded three months ago. Non-labour input costs — which include energy expenses — are expected to rise 5.2%, compared to the previous estimate of 5.8%.
Wage growth expectations also pulled back, falling to 2.5% from 2.8% in the prior quarter. The survey results are considered an important data point ahead of the ECB’s rate-setting meeting scheduled for Thursday.
Despite the more optimistic outlook on prices and wages, firms’ broader inflation expectations remained largely stable. Projections for one and three years out held steady at 3.0%, while the five-year outlook edged up slightly to 3.1% from 3.0% three months ago.
The ECB is widely anticipated to hold interest rates steady at this week’s meeting. However, persistently high oil prices are fueling speculation that the central bank could raise its 2.25% deposit rate again when officials reconvene in September.
