Created
: 2024.10.09
2024.10.09 20:01
Inflation expectations in the euro area have collapsed. At one point, the market was only expecting inflation of just over 1.5% in a year's time - well below the ECB's inflation target. However, this was probably only a brief excursion into such low territory. In the past few days, expectations have corrected again, and in a year's time, inflation is now expected to be around the level seen at the end of August, Commerzbank's FX analyst Michael Pfister notes.
"Correction is likely to be driven mainly by the sharp rise in the price of oil. Last week, the price of oil rose by almost $8 per barrel on the back of rising geopolitical tensions in the Middle East, which explains the rise in inflation expectations quite well. The link is also understandable: when the oil price rises, so does inflation. And now the oil price is roughly back to the level seen at the end of August."
"Interest rate expectations have indeed corrected in recent days, but not during the period of the stronger oil price increase. During this period, rate expectations remained rather unchanged. Rate expectations only corrected after Friday's surprising payrolls, after which the market priced out a rate cut of around 25 bps. However, this tends to affect the long end; for the next 2-4 meetings, a rate cut at each meeting seems to remain the base case."
"Inflation expectations did not rise due to the payrolls, but were driven by the oil price. At the same time, interest rate expectations were not corrected due to higher inflation expectations, but only due to the US payrolls. The market now seems to have fully bought into the story that the real economy, rather than inflation, is the key factor for further interest rate cuts."
Created
: 2024.10.09
Last updated
: 2024.10.09
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy