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Euro-area consumers raised their inflation expectations across every horizon in the ECB’s August survey: 3.0% for the next 12 months, 2.9% three years ahead and 2.5% five years ahead. The release matters because it arrives just after the ECB’s September 10 rate hike and while energy prices remain central to global rate repricing.
But the correct chain is not ‘higher expectations = automatic rate hikes’. ECB Vice President Boris Vujcic stressed today that policy is based on a broad set of data and that a persistent energy shock can work in two directions: lifting inflation while also reducing real household income, consumption and growth.
What changed in consumer expectations
| ECB CES indicator | Aug. 2026 | July 2026 | Reading |
|---|---|---|---|
| 12-month inflation expectation | 3.0% | 2.9% | higher |
| 3-year inflation expectation | 2.9% | 2.7% | higher |
| 5-year inflation expectation | 2.5% | 2.4% | higher |
| Expected nominal income growth | 1.0% | 1.0% | unchanged |
| Expected nominal spending growth | 3.6% | 3.6% | unchanged |
| Expected economic growth | -1.2% | -1.2% | unchanged |
| Expected unemployment rate | 11.0% | 11.2% | slightly lower |
The five-year move is particularly worth watching because longer-term expectations help show how persistent consumers think inflation may become. Still, the Consumer Expectations Survey is not an ECB staff forecast and it is not a trading signal.
The ECB is already tighter, without a preset path
On September 10 the ECB raised all three key rates by 25 basis points. Effective September 16, the deposit facility rate is 2.50%, the main refinancing rate is 2.65% and the marginal lending rate is 2.90%.
Its new baseline projects headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. The Governing Council also repeated that decisions are data-dependent and that it is not pre-committing to a particular rate path.
Reuters reports that money markets now price three or four more hikes by the end of 2027, potentially taking the deposit rate to 3.25%-3.50%. That is market pricing, not ECB guidance.
Why expensive energy is not only an inflation story
Vujcic argued that oil and gas should not be viewed in isolation. If elevated prices persist, they can raise inflation directly while also weakening household purchasing power and consumption. The same shock can therefore increase price pressure and damage demand.
Markets may see ‘higher energy’ and price more hikes, while the ECB must judge whether the growth drag becomes strong enough to change the overall balance.
The issue also connects with global bond repricing. In our analysis of the U.S. 10-year Treasury above 5%, we showed how inflation, debt supply and term premium can move long yields beyond one central-bank decision.
What it means for EUR/USD
For EUR/USD, ‘more hawkish ECB = stronger euro’ is too simple. The pair reflects the relative ECB-Fed path, bond yields, growth and global risk.
If euro-area inflation expectations keep rising and the ECB tightens faster than markets already discount, the rate differential can become more supportive for the euro. But if expensive energy damages euro-area growth more than U.S. growth, the growth channel can offset some of that rate support.
The new CES release is therefore useful as a regime check; it does not by itself tell us the next ECB decision or EUR/USD direction.
Three scenarios to verify
More persistent inflation: expectations stay high, core inflation and wages remain firm and growth holds up. The case for additional hikes strengthens.
Energy shock weakens demand: prices remain high but consumption and growth deteriorate. The ECB may become more cautious even with elevated headline inflation.
Mixed signal: consumer expectations rise but realised data do not confirm de-anchoring. Markets may have priced an aggressive path too quickly.
The September 18 lesson is precise: inflation expectations are rising, but energy alone does not set ECB rates. For EUR/USD, the key is the combination of inflation, growth and the ECB’s relative surprise versus the Fed.
Sources
- ECB, Consumer Expectations Survey – August 2026: https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.pr260918~295b3ab978.ga.html
- ECB, Monetary policy decisions, September 10, 2026: https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.mp260910~314e508016.en.html
- Reuters, September 18, 2026: https://www.reuters.com/business/finance/ecbs-vujcic-cools-oil-fuelled-bets-rate-hikes-2026-09-18/
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