Inflation expectations drop: Euro zone citizens have significantly reduced their predictions for inflation, as revealed in a survey conducted by the European Central Bank (ECB) on Tuesday. This development is reassuring for the ECB's efforts to manage and control price levels.

The Consumer Expectations Survey (CES) serves as a crucial tool for policymakers, helping them assess whether households trust the ECB's capability to achieve its 2 per cent inflation target. Such trust can influence wage expectations, as well as impact people's saving and spending behaviours.

The most recent iteration of the survey, conducted in November, indicates that the median household now anticipates a 3.2 per cent increase in prices over the next 12 months, down from the previous month's expectation of 4.0 per cent. Additionally, projections for inflation three years ahead have also decreased from 2.5 per cent to 2.2 per cent.

This trend likely corresponds with a notable decline in inflation in November, along with a reduction in lending due to the ECB's substantial interest rate hikes.

(With Reuters Inputs)