Our new CIO Special discusses developments in Eurozone inflation, the ECB’s monetary policy intentions and the outlook for sovereign bonds. As well as concluding that there is scope for a further rise in Eurozone government bond yields in the coming 12 months, we highlight the following:
- Recent declines in consumer price inflation rates in December suggest that price momentum in the euro area may have peaked.
- However, easing inflation masks persistent price pressures, which is why the ECB must remain vigilant.
- The recent recovery in euro sovereign bonds appears fragile and market volatility is likely to remain high.