Latest News Stream - Inflation Expectations

Median expectations for price growth over the next 12 months in the Euro Area edged up to 3.1% in September 2026, the most in four months, compared to 3% in August. Consumers also expect the price of their home to increase by 3.5% over the next 12 months, higher than 3.4% in August. Expectations for mortgage interest rates in 12 months’ time remained unchanged at 4.9%. Meanwhile, median expectations for inflation three years ahead and five years ahead were unchanged at 2.9% and 2.5% respectively. Elsewhere, expectations for nominal income growth over the next 12 months increased to 1.1% from 1% and expectations for economic growth over the next 12 months decreased to -1.5% from -1.2% in August. Expectations for the unemployment rate 12 months ahead increased to 11.3% from 11%.

Australia’s consumer inflation expectations rose to 5.3% in October 2026, up from 4.9% in the prior two months and reaching their highest level since June. The outlook was reinforced by August data showing trimmed mean CPI remained elevated at 3.6% year-on-year, its highest since September 2024 and above the Reserve Bank of Australia’s 2–3% target range. At its October meeting, the RBA unanimously raised the cash rate by 25bps to 4.6%, its fourth hike this year and lifting borrowing costs to their highest level since 2011. Policymakers said inflation remained elevated, with some upside risks identified in August now materialising. They also noted that strong AI-related demand is driving rapid increases in global prices for technology-related goods. Still, the board said monetary policy was well placed to respond to developments, while remaining focused on its mandate of price stability and full employment.

South Africa's one-year-ahead inflation expectations among households eased to 4% in Q3 2026 from 4.2% in the previous period, when the oil shock caused by the Middle East conflict pushed expectations higher. Average inflation expectations two years ahead, a measure the central bank closely tracks in setting interest rates, also edged down to 3.8% from 3.9% previously. The South African Reserve Bank seeks to anchor inflation expectations around its 3% inflation goal. Since the last survey, inflation rose to a peak of 5% in June before moderating to 4.3% in July.

Australia's consumer inflation expectations rose to 4.9% in August 2026, rebounding from July's six-month low of 4.7%. The increase pointed to persistent price pressures, with trimmed mean CPI rising 3.6% year-on-year in June, matching its fastest pace since September 2024. Reserve Bank Governor Michele Bullock recently warned that inflation remains too high, while highlighting upside risks from commodity price volatility amid the Middle East conflict. Meanwhile, Assistant Governor Christopher Kent said that tight monetary policy was working as intended, with its restrictive stance continuing to weigh on demand and help bring inflation back toward target.

The Reserve Bank of New Zealand’s (RBNZ) quarterly survey of expectations showed that business managers expect inflation to slow to 2.34% over the next two years in Q3 2026, down from 2.53% in the previous period, marking the lowest reading since Q4 2025. Meanwhile, one-year inflation expectations also moderated to 2.60%, down from 3.41% in Q1. Conversely, longer-term expectations accelerated, with five-year inflation forecasts rising to 2.31% from 2.22%, while ten-year expectations edged up to 2.20% from 2.19%. In terms of monetary policy, respondents expect the Official Cash Rate (OCR) to rise to 2.73% from 2.34% by the end of the September quarter and further to 3.21% over the next year. The survey was conducted after the RBNZ’s monetary policy decision in May 2026.

US median inflation expectations for one year ahead edged down to 3.6% in July 2026 from 3.7% in June which was the highest since September 2023. Inflation expectations decreased for medical care (by 0.5 percentage point to 8.9%) and rent (by 2.4 percentage points to 5.9%) while remaining unchanged for food (at 5%) and median home price growth (at 3.2%). On the other hand, consumers expect prices to increase faster for gas (by 1.4 percentage points to 2.9%) and college education (by 0.1 percentage point to 5.8%). Meanwhile, inflation expectations remained unchanged at the three- and five-year-ahead horizons at 3.3% and 3%, respectively. Elsewhere, median one-year-ahead earnings growth expectations remained steady at 2.8% and household spending growth expectations slightly decreased by 0.1 percentage point to 4.9%. Unemployment expectations increased by 1.1 percentage points to 42.8%.

UK households' one-year-ahead inflation expectations declined to 3.4% in July 2026 from 3.8% in June, marking the lowest reading since February and extending the retreat from the March high of 5.4% following the initial US strikes on Iran. Longer-term expectations also moderated, easing to 3.7% from 3.9%. Inflation expectations have now largely retraced the Iran war-related spike, despite the recent resurgence in global oil and gas prices.

Eurozone median inflation expectations for the next 12 months fell for a second consecutive month to 3% in June 2026, the lowest since February, from 3.5% in May. Consumers expect the price of their home to increase by 3.4% over the next 12 months, compared with 3.6% in May. Expectations for mortgage interest rates went up to 5% from 4.9%. Meanwhile, expectations for inflation three years ahead also declined to 2.8% from 2.9% while expectations for inflation five years ahead remained unchanged at 2.4%. Uncertainty about inflation over the next 12 months decreased for the second consecutive month, but remained higher than the level prevailing before the start of the war in the Middle East. Elsewhere, expected nominal spending growth over the next 12 months decreased to 3.6% from 3.8% in May. Expectations for economic growth over the next 12 months increased to -1.4% from -1.7% and expectations for the unemployment rate 12 months ahead decreased to 11.2% from 11.3% in May.

Australia's consumer inflation expectations eased to 4.7% in July 2026, down from 5.5% the previous month, marking the lowest reading since January. The decline reflected moderating headline inflation, though still above the Reserve Bank’s 2–3% target. Meanwhile, underlying inflation remains sticky, with the trimmed mean CPI up 3.6% year-on-year in May, the fastest pace since September 2024. Governor Michele Bullock noted that three rate hikes since early 2026 have curbed domestic price pressures and limited spillovers from higher oil and commodity costs. The central bank has reiterated its commitment to restoring price stability, stressing that while inflation accelerated in late 2025 amid supply shocks and energy costs, tighter policy should gradually ease pressures.

South Africa's one-year-ahead inflation expectations among households surged to 4.2% in Q2 2026 from an all-time low of 3.6% in the previous period. Average inflation expectations two years ahead, a measure the central bank closely tracks in setting interest rates, also inched up to 3.9% from 3.6% previously. The survey, conducted between May 18 and June 4, preceded the signing of the agreement to reopen the Strait of Hormuz, which has since eased global oil prices and reduced domestic fuel costs. Between the two survey periods, South Africa's annual inflation climbed to 4.5% from 3%, driven by a spike in gasoline prices to record levels. Among respondents, analysts see the fastest return to the central bank’s 3% target, with inflation easing to 3.5% by 2028. Businesses and unions are more cautious, expecting it at 4% and 4.4%, respectively.

Australia’s consumer inflation expectations eased to 5.5% in June from 5.6% in the previous month, marking the lowest reading since March and suggesting households are slightly less concerned about future price pressures. The decline comes as the Reserve Bank of Australia’s recent policy tightening filters through the economy. Governor Michele Bullock said the three rate hikes delivered since the start of the year have helped curb domestic inflation and limit second-round effects from higher oil and commodity prices. Policymakers have reiterated their commitment to returning inflation to the target corridor of between 2% and 3%, noting price pressures accelerated in late 2025 and remain elevated. Official data showed annual inflation slowed to 4.2% in April from 4.6% in March, though still above the RBA’s 2–3% range. Underlying inflation stayed sticky, with the trimmed mean CPI rising 3.4% yoy, the highest since September 2024.