A James Alexander post
The ECB released its Quarterly Survey of Professional Forecasters today. It shows a major drop in inflation expectations for the EuroZone for 2016.
On the good old principle that next year will be much like the last year, as 2016 approaches professional economists (and the ECB’s) own teams have ‘fessed up’. They got 2015 horribly wrong. Having shot for 1.2% in 2015 this time last year the actual result is now coming in at 0.1%!
The ECB publishes their interpretation of EZ breakeven inflation rates once a month. These market-based measures appear to have been better forecasters. Around this time last year the “one-year rate two years ahead” was implying less than 1% inflation in the short term. They have been weak again so the economists are now following them down. All except one (red line) show the ECB missing even its own self-defeating target of “close to, but below, 2%”.