Euro zone consumers lift inflation expectations, ECB survey shows

FRANKFURT, Sept 26 (Reuters) - Euro zone consumers raised some of their inflation expectations in August and saw higher income growth in the year ahead, the European Central Bank's monthly Consumer Expectations Survey showed on Friday.

Median expectations for inflation over the next 12 months rose in August to 2.8% from 2.6% a month earlier while expectations five years ahead increased to 2.2% from 2.1%, their highest level since August 2022.

However, expectations for three years out remained unchanged at 2.5%, the ECB said based on a survey of 19,000 adults in 11 euro zone countries. The ECB cut interest rates by two percentage points in the year to June but has been on hold ever since, arguing that inflation was now at its 2% target and there was no urgency in adjusting rates further.

Still, there is a simmering debate behind a seemingly benign outlook. Some policymakers fear that weak growth and a strong euro will drag inflation persistently below target, making it necessary to cut rates further.

Others meanwhile argue that fiscal largesse from Germany and persistent domestic price pressures will keep feeding inflation, so no more support was needed for an economy already growing at its potential.

Consumers also raised their nominal income growth expectations for the next 12 months to 1.1% from 0.9% but kept their spending growth outlook unchanged and saw a slight increase in unemployment.

They also expect economic growth to remain weak and they kept their year-ahead growth expectation stable at -1.2%. (Reporting by Balazs Koranyi; Editing by Toby Chopra)