Eurozone Inflation Expectations Spike Amid Geopolitical Risks

Eurozone median inflation expectations for the next 12 months jumped to 4.0% in March 2026, the highest level since October 2023 and up sharply from 2.5% in February. This marked the largest monthly increase since early 2022, when Russia’s invasion of Ukraine disrupted energy markets. The escalating Iran war and the blockade of the Strait of Hormuz have led to a surge in energy prices and internsifed fears of broader inflationary pressures. Longer-term expectations also rose, with three-year inflation forecasts climbing to 3.0% in March from 2.5% in February, and five-year expectations edging up to 2.4% from 2.3%. Uncertainty over short-term inflation grew, though the upward trend in expectations was consistent across income groups. Lower-income respondents reported slightly higher near-term expectations, while younger respondents (18-34) continued to anticipate lower inflation than older age groups.

Eurozone median inflation expectations for the next 12 months decreased for a second consecutive month to 2.5% in February 2026, the lowest since October 2024, from 2.6% in January. Expectations for inflation three years ahead also went down to 2.5% from 2.6% while expectations for five years ahead remained unchanged at 2.3%. Uncertainty about inflation expectations over the next 12 months remained unchanged. Meanwhile, expectations for growth in the price of homes over the next 12 months declined to 3.6% from 3.7%, while expectations for mortgage interest rates in 12 months’ time remained unchanged at 4.7%. Elsewhere, expectations for nominal income growth over the next 12 months remained unchanged at 1.2%, while expectations for spending growth rose to 3.5% from 3.4%. Expectations for economic growth became less negative (-0.9% vs -1.1%), while the expected unemployment rate decreased (10.8% vs 11%).

Eurozone median inflation expectations for the next 12 months decreased to 2.6% in January 2026, the lowest in six months, from 2.8% in December. Expectations for inflation three years ahead were unchanged at 2.6%, while inflation expectations for five years ahead decreased to 2.3%, from 2.4%. Uncertainty about inflation expectations over the next 12 months remained unchanged in January. Respondents in lower income quintiles continued to report on average slightly higher inflation perceptions and short-horizon expectations than those in higher income quintiles, a trend observed since 2023. However, the broad evolution of inflation perceptions and expectations remained closely aligned across income groups. Younger respondents (aged 18-34) continued to report lower inflation perceptions and expectations than older respondents (aged 35-54 and 55-70).