Key euro zone market inflation gauge nears all-time lows ahead of ECB

FILE PHOTO: An European Union flag flutters above the Germany's Christian Democratic Union party (CDU) headquarters after first poll results of the European Parliament elections in Berlin, Germany, May 26, 2019. REUTERS/Hannibal Hanschke - Copyright HANNIBAL HANSCHKE(Reuters)

By Reuters

Published on 06/06/2019 - 11:34•Updated 10/05/2024 - 19:00

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LONDON (Reuters) - A key market gauge of euro zone inflation expectations, the five-year, five-year forward inflation swap, on Thursday fell to within sight of record lows hit in 2016 ahead of a European Central Bank meeting.

The five-year, five-year forward fell to 1.2739%, its lowest point since 2016 when it fell to a record low around 1.25%.

The sharp decline in inflation expectations in recent weeks is a worrying sign for the ECB, which has failed to meet its near 2% inflation target in recent years.

Money market pricing showed that investors now price in almost a 70% chance of a 10 basis point cut in ECB rates by the end of the year.

(Reporting by Virginia Furness; Editing by Dhara Ranasinghe)

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