Nataxis Research publishes a note detailing how prolonged supply and demand imbalances in the Eurozone are going to keep rates higher for longer than most markets currently expect.
The state of supply and demand for goods and services in the eurozone
In recent times (since early 2023), insufficient demand has been more cited as a factor limiting eurozone 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 demand for services and labor, with insufficient supply.
Restrictive monetary policy has not yet returned the eurozone to a situation of excess supply of goods and services.
As long as the eurozone is in a situation of excess demand for goods and services, inflation will be higher than financial markets expect.
Source: Fx Street
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