Oliver Mangan: Markets are not convinced that inflation will fall back to 2%

Given the weak economic outlook, interest rates would be expected to be much lower than markets are predicting if inflation has been vanquished in two years’ time

The recent decline in headline inflation has been driven by falling energy prices but a fresh surge in gas prices in Europe next year cannot be ruled out.

Not surprisingly, the first drop in the annual rate of eurozone inflation in 17 months to 10% in November from 10.6% in October has got a lot of attention. 

It follows a similar fall in US CPI inflation to 7.7% in October from 8.2% in September, moving it further below the high of 9.1% hit in June.