Inflation Expectations Remain Well Below Target

The ECB’s monetary policy stance has been very accommodative for a while now. However, inflation expectations, as implied by the forward-swaps market, remain stubbornly below the central bank’s long-term inflation target. While interest rates were left unchanged at yesterday’s meeting, Mario Draghi, the ECB’s president, paved the way for further easing, commenting that the bank saw rates at present or lower levels until mid-2020. It is also considering other measures, including resuming quantitative easing. This time last year, the ECB was actually talking about a possible rate hike toward the end of 2019.

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