Forget the creepy predictions about Tokyo-style deflation. The predicted inflation in the Euro zone in five years has been rising to the highest level this year. Not predicted by some Brussels government agency, but based on the difference between the yields on inflation protected bonds and conventional bonds. In five years the predicted inflation for the consecutive five years is 2,64%. ECB President Jean-Claude Trichet is monitoring this level closely. According to Commerzbank’s analyst David Schnautz today’s cut in the ECB rate has been the last we’ve seen. (credits to AFS for the suggestion)
