Broom? - Check. Rug? - Check
Last month, the measure of consumer inflation expectations rose to the highest since Jan 2014.
Consumer inflation expectations
The ECB has been at pains to note that they see this inflation as temporary but one thing they've dropped from the opening statement of previous ECB governing council meetings is language about inflation expectations remaining anchored. This is a big part of the ECB's mandate and the only reference to it in the last two meetings was during question time, and that was mainly noting that market based expectations were anchored. Draghi even went so far as to explain the rise is survey inflation expectations as people seeing lower risk of deflation.
"I gave you a few signs that it's working, a few data, but there are other data; for instance the increase in the market-based [inflation] expectations, as you've seen. The survey-based expectation measures also increased, although they are stable. It's interesting; they increased in the short term but they are stable in the long term. So the risk of deflation according to any measure has largely disappeared."
If these inflation expectations keep running higher, the ECB won't be able to ignore them for long, just as it won't if inflation keeps ticking higher and we start to see the core rise. The core is their last hope in talking down inflation but rates slipping their anchor while the core stays low will give them a tough decision to make.
We get the latest inflation expectation numbers at the top of the hour in the economic confidence data.
