Inflation and Interest Rates to Remain High in the Long Term


ZEW Financial Market Survey: Special Question

The median forecast is significantly higher for 2024 than for 2022 and 2023.

In the period 2023 to 2025, the inflation rate in the eurozone is expected to exceed the ECB’s target of 2.0 per cent by a greater margin than was still assumed in November 2022. Wage developments in the eurozone have again led to higher inflation expectations among financial market experts, while energy prices have had a dampening effect. The experts assume that the ECB will raise interest rates further in the coming Governing Council meetings, and more sharply than expected in November 2022. Compared to 2022, however, the rate hikes in 2023 are not expected to be as high. For 2024 and 2025, respondents expect the key interest rate to be lowered again. These are the results of the special question included in the ZEW Financial Market Survey in February 2023, in which the respondents gave their assessment of the developments of inflation and key interest rates in the eurozone for the years 2023–2025.

In the February 2023 survey, financial market experts expect median inflation rates for 2023, 2024 and 2025 of 6.0, 3.5 and 2.5 per cent, respectively. This shows that the respondents continue to assume that inflation will slow down over time from 2023 onwards. However, the inflation forecasts for 2024 are slightly higher than in November 2022, when median inflation rates of 6.0 and 3.1 per cent were still expected for 2023 and 2024.

About the survey

The ZEW Financial Market Survey has been conducted since December 1991. Participants are asked monthly about their expectations concerning the development of major international economies, including Germany, the eurozone, the United States and China. In total, the panel consists of about 350 financial analysts from banks, insurance companies and selected corporations, specifically from the finance, research and economics departments as well as the investment and securities departments. Most of the participants are from Germany.

The financial experts are asked about their expectations on a six-month horizon regarding the development of the economy, the inflation rate, short- and long-term interest rates, equity prices and exchange rates. In addition, they are asked to assess the earnings situation in 13 German sectors. Besides a fixed survey section, special questions on current topics are included on a regular basis. The ZEW Indicator of Economic Sentiment, which has established itself as an early indicator of economic development (“ZEW Index”), is calculated from the expectations of financial market experts on the development of the economic situation in Germany. The results are published and analysed in detail in the monthly ZEW Financial Market Report.