The Eurozone experienced an average inflation rate of 2.2% during
the period from 2002 to 2007. Looking ahead, several factors are poised to
drive inflation higher compared to that period. These factors include increased
energy prices, a tighter job market, diminishing productivity gains, and a
prevailing situation of excess demand, contrasting with the excess supply
observed from 2002 to 2007.
If inflation indeed surpasses 2.2% in the near to medium term
(reaching levels such as 2.7% or 3%), it is likely that both short-term and
long-term interest rates will be higher than those observed between 2002 and
2007.