European Central Bank adds five-year-ahead inflation expectations to Consumer Expectations Survey and reports stability near the 2% target

The European Central Bank published an Economic Bulletin analysis of the new five-year-ahead inflation expectations indicator in its Consumer Expectations Survey, which will be included in the survey’s published expectations measures from the April 2025 data release. The analysis finds that consumers’ long-term inflation expectations have remained close to the ECB’s 2% target despite the 2022-23 inflation surge, supporting an assessment that expectations have stayed well anchored. Median five-year-ahead expectations have been broadly stable since 2022 at around 2.1%, easing from 2.3% in August 2022 when euro area inflation was 9.1%. The downward-sloping term structure across the one-, three- and five-year horizons is consistent with consumers expecting inflation to move closer to target over time. Distributional results show five-year expectations are more concentrated around 2% than three-year expectations, although there is also a sizeable share below target and a right tail. In February 2025, 21.3% of respondents expected no price changes at the five-year horizon, compared with 17.6% at three years. The survey’s credibility question indicates respondents with expectations near target (1.5% to 2.5%) report a higher mean likelihood that the ECB will maintain price stability over the next five years (48.5%) than those below 1.5% (39.1%) or above 2.5% (37.7%), and longer-term expectations appear less sensitive to inflation surprises than medium-term expectations. The ECB argues that monitoring inflation expectations across different horizons, including the new five-year measure, provides additional information on the anchoring of consumer expectations, particularly during large and persistent inflation shocks.