The European Central Bank is seeing some progress in its efforts to push down underlying inflation but this is not yet enough, ECB chief economist Philip Lane told a conference in Riga today.
Professor Lane said he does not take a lot of comfort from the recent rapid fall in overall inflation because this is largely driven by the reversal of big energy price increases from a year earlier.
This rapid decline that lowered the headline rate to 2.9% last month is likely over for now and price growth will be in the "high twos or low threes" in 2024 before a drop back to the 2% target in 2025, he added.
Meanwhile, euro zone consumers have raised their expectations for inflation over the next 12 months to 4%, a European Central Bank survey showed today, in a potential headache for the ECB in its effort to rein in prices.
Households' forecasts for inflation are by nature imprecise but they can influence wage demands, spending and saving - three crucial factors for the setting of retail prices.
The ECB's Consumer Expectation Survey, carried out in September and released today, showed the median respondent thought inflation would be 4% in the next 12 months, up from 3.5% in August and climbing to the highest level since the spring.
The ECB also uses the survey as a gauge of whether households are keeping faith in its ability to bring inflation back to its 2% target over the medium term amid a global debate about whether such goals should be raised.
Here the picture was at least not getting worse, with the median respondent putting inflation at 2.5% in three years' time, unchanged from the previous survey round but still above where the ECB's goal.
The ECB also raised its inflation forecast for 2024 in September, mainly as a result of higher energy prices, as it raised interest rates to record highs.
It now expects prices to rise by 5.6% this year, 3.2% in 2024 and 2.1% in 2025.
