Euro \u2060zone consumers sharply raised their inflation expectations and banks tightened access to credit in the wake of the Iran war, polls showed today, illustrating the early impact of a surge in energy costs.<\/p>\n
The European Central Bank’s Consumer Expectations Survey showed inflation expectations for one year ahead jumped to 4% in March from 2.5% a month earlier while bets for three years out rose to 3% from 2.5%, both well above the ECB’s 2% target.<\/p>\n
The central bank’s quarterly Bank Lending Survey indicated lenders had tightened their criteria to \u200capprove loans by more than expected \u2060in the three months to March and expected to continue doing so this quarter.<\/p>\n
The surveys put euro zone rate-setters in a difficult position: on the one hand rising inflation expectations would call for interest rate hikes, on the other financing conditions are already worsening even before any ECB move.<\/p>\n
ECB policymakers are expected to keep interest rates \u200con hold when they meet on Thursday as they wait for more evidence about the duration and extent of the energy-induced inflation shock, but hikes are \u2060expected to be on the table by their next decision in June.<\/p>\n
They may take some \u200ccomfort in consumers’ inflation expectations for five years ahead, which only moved to 2.4% \u2060from 2.3%.<\/p>\n
And banks \u200cwere already doing some of the ECB’s work for it by making credit harder to get, particularly for firms which saw the sharpest tightening since the third quarter of 2023.<\/p>\n
“Perceived risks to the economic outlook and a lower \u2060risk tolerance of banks were the main contributing factors, with banks indicating that geopolitical and energy developments exerted tightening pressure,” \u2060the ECB said.<\/p>\n
“Some banks reported additional tightening related to exposures to energy-intensive firms and to the Middle East,” it added.<\/p>\n
For the three months to June banks expect “a widespread and more marked net tightening of credit standard”, the ECB said.<\/p>\n
Surveys last week showed the global economy, and in particular the euro area, was facing ever more tangible strains from the energy shock triggered by the \u200cIran war as factories grapple with soaring production costs and activity weakens even in services sectors.<\/p>\n","protected":false},"excerpt":{"rendered":"Euro \u2060zone consumers sharply raised their inflation expectations and banks tightened access to credit in the wake of…\n","protected":false},"author":2,"featured_media":403650,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,61,60],"class_list":["post-421778","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-ie","tag-ireland"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/421778","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=421778"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/421778\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/403650"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=421778"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=421778"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=421778"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}