ZEW Financial Market Survey: Fears of Inflation Curbed by Decline in Economic Expectations

Economic expectations have fallen to -0.1 points in December, according to the ZEW Financial Market Survey. The barometer has thus fallen into negative figures for the first time in almost two years.

Each with 20 per cent, positive and negative assessments are balanced among the surveyed financial analysts. Following the publication of the latest US data, insecurity has increased among experts as fears of a hard landing in the US economy grow.

The ZEW Financial Market Survey is carried out on a monthly basis by the Centre for European Economic Research (ZEW) and includes 400 analysts and institutional investors, who are asked about their medium-term expectations concerning economic activity and capital markets. The ZEW Indicator of Economic Sentiment shows the balance between positive and negative expectations in regard to economic developments in Germany.

A direct consequence of the negative economic outlook is that financial experts are significantly less fearful of inflation. Only 18 per cent of the surveyed experts expect to see a rise in inflation rates. In November, the percentage of experts expecting inflation rates to increase was still twice as high as it is now. Almost 18 per cent of the experts believe the European Central Bank will increase interest rates in the medium term, while almost one quarter expects to see interest rates to fall. When it comes to the US, as many as 53 per cent of experts expect the key interest rate to be cut by the Federal Reserve.

Contact

Birgit Sasse, E-mail: sasse@zew.de

Dr Felix Hüfner, E-mail: huefner@zew.de