German households less pessimistic on inflation, survey shows

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FILE PHOTO: Full shelves with fruits are pictured in a supermarket during the spread of the coronavirus disease (COVID-19) in Berlin

FRANKFURT (Reuters) – German households are becoming less pessimistic about inflation prospects, predicting a moderation in price pressures over the next year, the Bundesbank said on Friday based on a monthly survey of consumer expectations.

Inflation expectations over the next 12 months in the euro zone’s biggest economy fell to 7.9% from 8.2% while the share of those expecting the inflation rate to increase significantly fell to 39% from 49%, the Bundesbank said.

Euro zone inflation hit a record high 10.6% in October but fell to 10% a month later, raising hopes that an energy driven spike in prices is now past its peak.

Still, disinflation in the bloc is likely to be slow and overall price growth is not expected to fall back to the European Central Bank’s 2% target until 2025, according to a Reuters poll of analysts.

German inflation is now expected to average 5% over the next five years, according to a median forecast in the survey, also a decline compared to a month ago.

(Reporting by Balazs Koranyi; Editing by Angus MacSwan)

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