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Eurozone consumers turned more optimistic about inflation and the economy in May, according to the ECB's latest Consumer Expectations Survey. One-year inflation expectations fell sharply to 3.5% from 4.0%, while expectations for inflation three and five years ahead were unchanged at 2.9% and 2.4%, respectively. The results suggest households expect the recent inflation surge to ease without significantly altering longer-term price expectations.

The survey also pointed to a modest improvement in the growth outlook. Consumers now expect the economy to contract by -1.7% over the next 12 months, an improvement from the previous expectation of a -2.2% decline. Income growth expectations edged up from 0.8% to 1.0%, indicating slightly greater confidence in household finances, although expectations for the labor market remained subdued with unemployment concerns still elevated.

The findings add to evidence that the easing in energy prices and improving geopolitical backdrop have begun to lift consumer confidence. For the ECB, the decline in short-term inflation expectations is encouraging as it suggests recent price shocks are not becoming embedded in household expectations. At the same time, stable medium-term inflation expectations and still-weak growth expectations support the central bank's cautious approach, allowing policymakers to monitor incoming data rather than feeling pressured to tighten policy aggressively again in the near term.

Full ECB Consumer Expectations Survey results here.

Tokyo inflation accelerated across all major measures in June, pointing to gradually strengthening underlying price pressures ahead of next month's Bank of Japan policy meeting. Core CPI, which excludes fresh food, rose from 1.3% yoy to 1.6% yoy, matching market expectations but remaining below the BoJ's 2% target for a fifth consecutive month. Headline inflation also picked up from 1.4% yoy to 1.7% yoy, while the core-core measure, which strips out both fresh food and energy, accelerated from 1.6% yoy to 1.9% yoy.

The rise in the core-core measure suggests inflation is becoming increasingly broad-based rather than being driven solely by energy costs. Price pressures are spreading into non-energy categories, particularly food and services. Food inflation presented a mixed picture, with rice prices falling -6% as last year's supply-driven surge continued to unwind. At the same time, prices for pork, tuna and potato chips all posted double-digit increases, indicating that cost pressures remain evident across many consumer staples.

Services inflation also continued to strengthen, rising 1.1% yoy and led in part by higher lodging costs. As services prices are generally viewed as a better gauge of domestic demand and wage-driven inflation, the latest figures are likely to be closely watched by BoJ policymakers. While core CPI remains below the central bank's target, the continued pickup in underlying inflation supports the view that price pressures are gradually becoming more entrenched, reinforcing expectations that the BoJ will continue its policy normalization path.

Chicago Federal Reserve President Austan Goolsbee said inflation remains the Federal Reserve's primary concern, warning that underlying price pressures continue to move in the wrong direction despite some recent improvement. Speaking in a CNBC interview on Thursday, Goolsbee said, "If we look at core inflation, it's still well too high and it's trending the wrong way, and we've got to see improvement on that." He added that while there have been "a few bright spots," policymakers still have more work to do before inflation can be considered under control.

Goolsbee pointed in particular to services inflation, where he acknowledged some encouraging developments but stressed that progress remains insufficient. "You have seen now a little bit of improvement on this services inflation, and I've been identifying that as something that we would want to see," he said. Even so, he concluded that "as between the two sides of the Fed's mandate—the inflation side and the job market side—clearly the problem's on the inflation side." He also noted that although oil prices could fall rapidly after their recent surge, services inflation remains elevated and moderating wage growth offers "no guarantee inflation will ease."

Despite his hawkish assessment of inflation, Goolsbee declined to offer guidance on the next policy move. He refused to speculate on whether the Fed should raise interest rates or keep them unchanged, saying he agreed with Chair Kevin Warsh's approach of avoiding unnecessary market speculation over the future rate path. His remarks reinforce the Fed's broader message that policymakers remain firmly focused on restoring price stability while leaving future decisions dependent on incoming economic data.