Investors once again fled for so-called “safe havens” on Thursday morning amid growing fears of stagnation and some reassuring comments from European Central Bank (ECB) officials that the bank is ready to act.
An ECB survey of professional forecasters jolted global asset markets as the economists cut their outlook for inflation in the euro zone region over the next few years.
The survey now predicts that consumer prices could remain at 0.9 percent in 2014, down from a first-quarter forecast of 1.1 percent. Estimates for next year and for 2016 also saw moderate downgrades and their longer term view of consumer prices remained firmly below the central bank’s targets.
Ken Wattret, the co-head of European & CEEMEA market economics at BNP Paribas said that while the new figures are not exactly collapsing, they are a good reason for the ECB to “continue to fret about losing credibility” when it comes to achieving its inflation targets.
European stock markets fell back on the news and bond yields – in the both the euro bloc and in the U.S. – shot lower as investors shunned riskier assets. The interest rate on the 10-year U.S. Treasury sank to 2.5320 percent after trading at 2.5605 percent. German bund yields lost even more with the 10-year falling by 20 basis points and the euro also fell to an 11-week low against the dollar.
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