FRANKFURT, March 27 (Reuters) – Euro zone consumers were reducing their inflation expectations in the run-up to the U.S.-Israeli war on Iran, before a surge in energy prices fundamentally changed the outlook, a European Central Bank survey showed on Friday.
Median expectations for inflation over the next 12 months and three years ahead both declined to 2.5% from 2.6% last month, while inflation expectations for five years ahead remained unchanged at 2.3%, the ECB’s Consumer Expectations Survey showed.
However, 97% of the survey responses were collected before the war broke out on February 28, the ECB added.
The ECB has since then sharply raised its inflation projections on surging energy costs, and a raft of surveys now indicate souring consumer expectations and surging prices.
The ECB sees inflation peaking above 3% under its most benign scenario while its adverse and severe scenarios see sharply higher and longer price surges.
(Reporting by Balazs Koranyi, Editing by Timothy Heritage)
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