Swap prices show that inflation expectations have fallen over the last two months
Traders in the swap market are not quite agreeing with analysts when it comes to when the ECB may move towards normalising monetary policy.
Analysts are seeing Eurozone inflation somewhere around 1.60% next year, but the inflation trajectory implied from swaps contracts show that it will sit somewhere around 1.26% only.
In fact, that figure has actually declined compared to what traders were seeing last month or even two months ago.
While the ECB appears rather confident for the time being that they can take steps towards normalising policy, some quarters of the market are still not buying it. Perhaps an all-out trade war will help with that, since it will boost import prices and give rise to inflationary pressures.
