ECB survey shows inflation expectations edged lower in February

Euro area consumers trimmed their short- and medium-term inflation expectations in February 2026, while becoming slightly less pessimistic about growth and a little more willing to spend. The ECB’s latest Consumer Expectations Survey shows median inflation expectations for both the next 12 months and the next three years fell to 2.5% from 2.6% in January, while five-year expectations held at 2.3%. The release comes with an important caveat: around 97% of responses were collected before the war in the Middle East began on 28 February, so the data largely reflect pre-shock sentiment.

What is the clearest signal from the February survey?

The clearest signal is that inflation expectations continued to soften, but only gradually. Consumers’ perceived inflation over the previous 12 months stayed at 3.0%, while one-year and three-year expectations both edged down by 0.1 percentage points. Long-run expectations were unchanged, suggesting households still see inflation moderating without assuming a dramatic return to very low price growth.

That matters for the ECB because household inflation expectations are one of the channels through which price dynamics can become embedded in wage demands and spending behaviour. A reading of 2.5% on the one-year horizon is still above the ECB’s 2% target, but the direction of travel is softer than earlier in the inflation cycle. The survey is one of the ECB’s regular inputs into monetary and economic analysis.

What does the survey say about consumers’ spending power?

Households do not appear to feel materially richer, but they do seem slightly more prepared to spend. Nominal income growth expectations for the next 12 months were unchanged at 1.2%, while expected spending growth ticked up to 3.5% from 3.4%. At the same time, perceived spending growth over the prior 12 months fell to 4.6% from 4.9%, which may indicate some easing in the intensity of cost pressures consumers felt earlier.

That gap between income expectations and spending expectations remains notable. Consumers still expect spending to rise much faster than income, which points to ongoing pressure on household budgets even as inflation expectations cool.

Are households less negative on the economy?

Slightly. Consumers’ expectations for economic growth over the next 12 months improved to -0.9% from -1.1%, meaning households still expect weak conditions, but not quite as weak as in January. Expectations for the unemployment rate 12 months ahead also fell to 10.8% from 11.0%, while the perceived current unemployment rate stood at 10.4%. In other words, households still expect some labour market deterioration, but not a sharp one.

This is consistent with a broader euro area picture in which consumers remain cautious rather than confident. The labour market outlook looks stable enough to avoid a more severe deterioration in sentiment, but not strong enough to generate a clear rebound in household optimism.

What is happening in housing and credit?

Housing expectations softened modestly. Consumers expected home prices to rise by 3.6% over the next 12 months, down from 3.7% in January, while mortgage rate expectations were unchanged at 4.7%. The survey also showed a decline in the net share of households reporting tighter credit access over the previous year, as well as a decline in the share expecting credit conditions to tighten in the year ahead.

That combination suggests households are not expecting a major improvement in financing conditions, but they are seeing less additional tightening than before. For lenders and housing market participants, this points more to stabilisation than to a strong rebound.

Why the timing caveat matters

The most important editorial note in this release is the timing. Because nearly all responses were submitted before 28 February 2026, the survey does not meaningfully capture the consumer impact of the Middle East war through energy prices, confidence, or inflation fears. That means the March survey, due on 28 April, may matter more for judging whether households have become more anxious about inflation and growth since the geopolitical shock.

Why This Matters to FinanceX Readers

For finance professionals and investors, the message is measured rather than dramatic: euro area households were becoming a little less worried about inflation and a little less negative on growth before the late-February geopolitical shock. That supports the broader view that domestic inflation psychology was easing, but it does not yet tell us how resilient that trend is under fresh energy and geopolitical pressure. For banks, asset managers and policy watchers, the March survey will be the more important test.