In the euro area, consumers’ medium-term inflation expectations were firmly anchored at our 2% target throughout the pandemic. According to the most recent data, median expectations are close to 3%, while average expectations have increased from 3% a year ago to almost 5% today. [25] Average long-term inflation expectations of professional forecasters, too, have started to gradually move away from our 2% target.
In July, they stood at 2.2%, a historical high. For both consumers and professional forecasters, we are also observing a marked increase in the right tail of the distribution – that is, the share of survey participants who expect inflation to stabilise at levels well above our 2% target. [26] Option prices in financial markets paint a similar picture.