Eurozone | Transitory inflation surge unlikely to boost bond yields
The coronavirus crisis pushed eurozone inflation to a four-year low of 0.3% in 2020. We expect it to rise to 1.2% this year, but primarily due to the end of a host of transitory factors rather than a pick-up in underlying price pressures. And, considering the ECB’s QE-backed pledge to engineer a sustained recovery in inflation, we see little scope for bond yields to move much higher.
What you will learn:
- Rising consumer energy prices will do the heavy lifting, adding around 1ppt to headline inflation this year compared to 2020.
- Core inflation may see a small lift later in 2021 as sectors hit hardest by the crisis begin to recover.
- Financial markets may try to push bond yields higher this year, especially if they interpret transitory inflation rises as a sustained surge.
Topics: Europe, Eurozone, Markets, Inflation, Bond market, Financial risks, Financial Services
-Jan-19-2021-01-18-08-43-PM.png)