ECB survey shows consumers becoming more optimistic on inflation

FRANKFURT (Reuters) - Euro zone consumers continued to cut their inflation expectations and also grew more optimistic on employment prospects even as they still saw economic contraction ahead, a fresh European Central Bank survey showed on Friday.

Inflation has fallen rapidly from double digit territory in late 2022, but policymakers now see it hovering on either side of 2.5% for the rest of the year, before falling back to their 2% target in late 2025.

Consumer views were not very different, as they cut their expectation for price growth for the next year to 2.8% in May from 2.9% a month earlier, and reduced their projection for three years ahead to 2.3% from 2.4%.

Economic growth expectations for the next 12 months remained unchanged at minus 0.8% while expectations for the unemployment rate decreased to 10.7% from 10.9%, the ECB's Consumer Expectations Survey showed.

The ECB cut interest rates from record highs early in June and signalled further moves ahead as inflation eases. But it made no commitment on the timing of its next cut and policymaker commentary suggests that a step will not even be considered before September, at the earliest.

(Reporting by Balazs Koranyi, Editing by William Maclean)