Finance and Economics Discussion Series (FEDS)
June 2025
How Stable are Inflation Expectations in the Euro Area? Evidence from the Euro-Area Financial Markets
Olesya V. Grishchenko, Franck Moraux, and Olga Pakulyak
Abstract:
We analyze evolution of inflation expectations in the euro area (EA) using a novel measure of inflation expectations implied by the French nominal and inflation-indexed bonds. Overall, we find that EA inflation expectations have been relatively well anchored in the 2004–2019 sample but have been somewhat sensitive to the incoming macroeconomic news and monetary policy shocks in the sample that includes the COVID-19 pandemic. Our results are robust with respect to the use of different inflation-indexed securities data, such as the EA inflation-linked swaps.
Keywords: Obligations Assimilables du Trésor, OAT, French inflation-indexed bonds, nominal-indexed bond spreads, inflation swaps, inflation expectations, macroeconomic news, monetary policy shocks, euro area, inflation anchoring, stability.
DOI: https://doi.org/10.17016/FEDS.2025.041
PDF: Full Paper
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