Significant Rise in Inflation Expectations
Research
24.04.2026
ZEW Financial Market Survey Shows Increased Price Pressure and Limited Scope for Interest Rate Cuts
Inflation expectations among financial market experts for the eurozone rose significantly in April 2026. For the current year, they expect the median inflation rate to be 2.7 per cent, which clearly exceeds the European Central Bank’s (ECB) inflation target of 2.0 per cent. According to 91 per cent of respondents, the rise in inflation expectations is mainly driven by energy price developments. At the same time, the results of the latest ZEW Financial Market Survey point to stable interest rates. Cuts in the key interest rate appear significantly less likely in the short term.
“Against this backdrop, a risk scenario emerges in which the ECB is constrained in both directions – premature interest rate cuts would further fuel inflationary pressure, while an excessively rapid tightening could additionally weigh on growth, which is already weak,” says Dr. Lora Pavlova, who is in charge of the ZEW Financial Market Survey and researcher in ZEW’s “Pensions and Sustainable Financial Markets” Research Unit.
“As long as inflation expectations remain elevated, there is little room for monetary policy easing. A stable interest rate is therefore considered the most likely scenario, while rapid interest rate cuts as well as a sustained monetary policy tightening are largely ruled out by the market consensus,” adds Anna-Lena Herforth, researcher in the “Pensions and Sustainable Financial Markets” Research Unit.
Interest rate expectations reflect monetary policy trade-off
Most experts anticipate that interest rates will remain stable in the coming months. Assessments about the interest rate path until the end of 2026 suggest a wait-and-see stance: a majority do not expect any change in key interest rates for the time being. However, expectations for the outcome of the ECB Governing Council meeting in June are divided: 48 per cent of experts think it likely that interest rates will remain stable, while around 47 per cent anticipate an interest rate hike between 16 and 25 basis points. The majority of respondents do not expect the council meetings after the summer break to result in any interest rate adjustment. However, a few voices are already anticipating a gradual interest rate cut in Q4 2026.
Energy prices drive inflation expectations
![[Translate to English:] Prognose der jährlichen Inflationsrate im Euroraum](/fileadmin/_processed_/6/b/csm_Inflationserwartung1_2f41f8890d.png "[Translate to English:] Prognose der jährlichen Inflationsrate im Euroraum")
![[Translate to English:] Inflationsprognosen für den Euroraum](/fileadmin/_processed_/0/f/csm_Inflationserwartung2_002ee6d4c7.png "[Translate to English:] Inflationsprognosen für den Euroraum")
According to 91 per cent of respondents, the rise in inflation expectations is mainly driven by energy price developments. Price increases for other commodities and persistent supply bottlenecks are also contributing significantly to the upward revision. Geopolitical tensions and international trade conflicts are further increasing price pressure. Conversely, the appreciation of the euro and a weaker economy in the eurozone are having dampening effects, although these play a minor role overall.
About the ZEW Financial Market Survey
The ZEW Financial Market Survey has been carried out on a monthly basis since December 1991, collecting expectations about the development of major international economies. These are currently Germany, the euro area, the USA and China. The panel consists of about 350 analysts from banks, insurance companies and large industrial corporations, working in the finance, research and macroeconomics departments as well as in the investment and securities departments of these companies.
