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Middle East energy risks delay the Federal Reserve's easing cycle, rate cut expectations slow down again

⑴ Eurozone consumers’ inflation expectations for the next three years slightly retreated in April, providing some relief for the European Central Bank, although policymakers may still raise interest rates next week. A monthly survey published by the European Central Bank on Monday showed that price increases during this period are expected to be 2.9%, down from the 3% forecast in March. ⑵ Expectations for inflation over the next 12 months remained unchanged at 4%; the five-year outlook stayed at 2.4%, above the European Central Bank’s medium-term inflation target of 2%. ⑶ On Monday, a central bank executive member warned that the risk of inflation expectations becoming unanchored is rising, meaning the European Central Bank cannot ignore the energy price spike brought on by the Iran conflict. ⑷ Officials hope to prevent turmoil in the energy market from spreading to a broader range of consumer prices. Data to be released on Tuesday may show that the Eurozone inflation rate has risen again, with analysts estimating it will reach 3.2%.

⑴ In April, loans from banks to the household sector in the Eurozone increased by 3% year-on-year to 719.4 billion euros, in line with expectations. ⑵ Loans to enterprises rose from 3.2% to 3.4%. ⑶ Overall, total credit growth in April for the private sector, covering households and non-financial enterprises, was 3.5%, the same as the previous month.