Eurozone: Inflation will be higher in the future than the 2.2% average between 2002 and 2007 – Natixis

Inflation in the Eurozone will be higher in the future than between 2002 and 2007 – when averaged 2.2%, analysts at Natixis say.

Medium-term inflation will determine the level of nominal and real interest rates

Average inflation in the Eurozone over the 2002-2007 period was 2.2%. We have seen the factors that will give rise to higher inflation in the future than between 2002 and 2007: higher energy prices, a tighter labour market, declining productivity gains, and a dominant regime of excess demand, whereas the dominant regime from 2002 to 2007 was excess supply.

If inflation is higher in the medium term than 2.2% (2.7%, 3%), we can expect both short-term and long-term interest rates to be higher than between 2002 and 2007.