Consumers’ interest rate expectations in a monetary policy tightening cycle

Evangelos Charalambakis and Virginia Di Nino

Economic Bulletin Boxes, 2023, vol. 5

Abstract: Evidence from the ECB Consumer Expectations Survey (CES) shows that consumers’ expectations for interest rates on mortgages and savings accounts have increased, in line with actual interest rate developments. Since June 2022 an increasing share of respondents, particularly among those with an adjustable rate mortgage (ARM) which are generally more directly exposed to interest rate changes, has favoured lower interest rates. A growing share of households with an ARM also expects difficulties in meeting their mortgage payments in the near future and intends to refinance the mortgage contract. In line with their higher exposure to interest rate changes, spending expectations of respondents with an ARM are more sensitive to changes in expected interest rates. Overall, the results of the CES suggest that consumers have been progressively incorporating the impact of higher interest rates into their spending decisions. JEL Classification: E03, E21, E52

Keywords: consumer expectations; Consumption growth; monetary policy (search for similar items in EconPapers)
Date: 2023-08
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