Eurozone rates to remain higher for longer than markets anticipate – Nataxis

Nataxis research is out with a note detailing how long-running supply and demand imbalances in the Eurozone are going to keep rates higher for longer than most markets are currently expecting.

The state of supply and demand for goods and services in the eurozone

In the recent period (since the start of 2023), insufficient demand has been cited more as a factor limiting the eurozone's industrial production. But if we look at services, construction and the eurozone economy as a whole, it is still massively in a situation of excess deman for goods services, and labour, with insufficient supply.

Restrictive monetary policy has not yet caused the eurozone to return to a situation of excess supply of goods and services.

As long as the eurozone is in a state of excess demand for goods and services, inflation will be higher than financial markets expect.