The euro inflation barometer rose to its highest level since May 2019
The prospect of a massive corona aid package from the US, an important trading partner, has raised inflation expectations in the euro zone. The barometer for long-term inflation expectations, the so-called five-year-five-year forward, climbed to 1.3579 percent on Tuesday. This is the highest level since May 2019. The value means that investors on the stock market between 2026 and 2031 expect inflation a little more than 1.35 percent on average.
US President Joe Biden, with the support of his Democrats and Republicans in Congress, wants to continue launching a $ 1.9 trillion aid package for the corona pandemic economy. So far, no breakthrough has been achieved. The most recent meeting with Republican senators was productive, the presidential office said on Monday.
The European Central Bank (ECB) is closely following the five-year-five-year forward. Because it provides information about how inflation expectations are developing on the stock market. The ECB is aiming for an inflation rate of just under two percent for the economy. Because that secures enough distance from deflation – a dangerous spiral of falling prices and falling investments, which is difficult to counter in monetary policy. However, the ECB has missed its inflation target for years. In December, the rate of inflation was negative at minus 0.3 percent.
