February 24, 2017 / 1:41 PM / 5 months ago

CORRECTED-Gauge of long-term euro zone inflation expectations at two-month low

1 Min Read

(Corrects figure in second paragraph)

LONDON, Feb 24 (Reuters) - A market measure of long-term inflation expectations in the euro area fell to a two-month low on Friday, dragged down by this week's sharp drop in short-dated government bond yields.

The five-year, five-year breakeven inflation forward, which is tracked closely by the European Central Bank, fell to as low as 1.7084 percent.

The inflation expectations gauge rose to as high as 1.8 percent in January as data pointed to speedier price rises. However, breakeven forwards are reacting to the fall in short-dated bond yields, with which they often move, analysts said.

Germany's two-year Schatz yield hit a record low of minus 0.95 percent earlier on Friday. (Reporting by Dhara Ranasinghe, editing by Nigel Stephenson)

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