Inflation swaps, analyst surveys, and other indicators find Europe’s economy watchers expecting inflation to continue above the European Central Bank’s (ECB’s) 2-percent target for at least a decade.

A technical measure that averages inflation’s expected rate from 2028 through 2033 found it at 2.67 percent, the highest since 2010.

Also, Europe’s yield curve is inverted: short-term ECB securities pay lower yields than longer-term notes and bonds. The assumption is that long-dated bonds will pay higher yields to offset losses to inflation over those interim years.

“None of [these indicators] are consistent with a pause” in the ECB’s march to higher interest rates, strategist Piet Christiansen at Danske Bank told Bloomberg. “Inflation expectations are still concerning.” 

In June, several forecasts put inflation above the bank’s 2-percent target until at least 2026, even though the region’s consumer price index dropped to an annual pace of 5.5 percent, slowing from 6.1 percent in June.

In a 4 August statement, the ECB said factors underlying inflation appear to have peaked. 

However, indicators show that “markets do not fully buy the ‘disinflation narrative,’” Evelyne Gomez-Liechti, a rates strategist at Mizuho Financial Group, said to Bloomberg.

TREND FORECAST: It is becoming increasingly difficult for Europe to avoid a recession; it entered a technical one in this year’s first quarter. 

ECB officials have said they would accept a recession if it helped to reverse inflation. Therefore, even in a recession, the ECB might well hike its interest rate again. The bank’s decision would depend on the recession’s depth and inflation’s rate at the time.

And with oil prices rising, so too will inflation in Europe, as people will be spending more euros to buy less products. Also, as China’s economy goes down so too will Europe’s exports which will in turn lower EU nation’s GDP.