Euro area consumers still expect inflation to stay close to the European Central Bank’s 2% target over the coming years, reinforcing the idea that the rate-cut cycle is likely over for now.

In the ECB’s October survey of 19,000 adults across 11 eurozone countries, households lifted their one-year-ahead inflation expectation slightly to 2.8% from 2.7%, but kept three‑year expectations at 2.5% and five‑year expectations at 2.2%. This profile is broadly in line with policymakers’ view that inflation is no longer a major concern after hovering around 2% for most of 2025 following a post‑COVID spike above 10%.​

These readings suggest that consumers believe price pressures are easing toward target even if some domestic cost pressures persist. That anchoring helps the ECB argue that its current stance is appropriate after a decade of fighting too‑low inflation before the surge.​

Markets see little room for more cuts

Because expectations remain benign, money markets now assign virtually no chance of a rate cut at the ECB’s next meeting and only about a one‑in‑three probability of any further easing in 2026. Many economists therefore think the policy rate has bottomed out after the ECB halved the deposit rate over the year to June and then paused.​

The survey also showed income expectations for the next year edging up to 1.2% from 1.1%, while expected spending growth stayed at 3.5%, supporting the narrative of moderate demand rather than overheating. ECB officials say they are keeping the door open to additional cuts but stress there is no urgency, and some argue the bank may already be done easing.​

Source: Investing.com / Reuters, “Euro zone consumers continue to see benign inflation path, ECB survey shows”​