Amid expectations of a possible rate cut by the European Central Bank (ECB) this week, European investors remain much more afraid of deflation than they are of inflation, according to Fitch Ratings’ latest poll of European fixed income investors.
The rating agency reports that, notwithstanding the gradual economic recovery and the substantial global monetary stimulus that has been supplied since the start of the financial crisis, investors are still wary of deflation risk. Fitch’s survey found that only 4% of investors surveyed view inflation as a high risk, whereas 44% say deflation remains a more serious threat.
“These investor views on deflation acknowledge the expected move by the ECB on Thursday to cut rates and announce new measures to support credit growth,” Fitch says, noting that data for May shows Eurozone inflation at a lower than expected 0.5%.
The survey, which represents the views of managers of an estimated €5.3 trillion ($7.88 trillion) of fixed-income assets, was conducted from April 2 to May 16.