Europe Inflation Expectations at Record Low Worsens ECB Headache

Euro-area inflation expectations slid to a record low, adding pressure on the European Central Bank to step up policy support for the region’s economy.

Five-year forward five-year inflation swaps, a gauge of investor estimates of price increases in coming years, dropped Wednesday to 1.1830%, well below the ECB’s target of close to, but below 2%. That suggests the central bank may have to take further steps to revive inflation, such as restarting bond buying, or potentially even cutting interest rates deeper into negative territory.