Inflation to stay above expected as long as unemployment rate remains below structural level – Natixis – Crypto News

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A flash from Natixis analysts is noting that if the Eurozone unemployment rate remains below the perceived structural unemployment level, then inflation will continue to run hotter than expected.

Inflation will be higher than expected

A commonly accepted result of economic analysis is that if the unemployment rate is lower than the structural uneployment rate, inflation will be higher than expected inflation.

If we represent expected inflation in the eurozone by inflation swaps (5-years in 5 years, in 10 years, etc.), it is currently 2.7%. It is quite clear that the unemployment rate in the eurozone is now lower than the structural unemployment rate, (this can be seen from the level of hiring difficulties and the ratio of job vacancies to the number of job seekers).

The fact that productivity gains are negative in the eurozone means that, even with zero growth, employment continues to rise and the unemployment rate continues to fall as the working-age population shrinks.

So, in this situation, the unemployment rate will remain below the structural unemployment rate and, as a result, inflation will remain above 2.7%, the level of expected inflation.