An inflation gauge favoured by the European Central Bank climbed to a level last seen in 2005 when policy makers began raising interest rates, according to UBS.
Inflation expectations as measured by the so-called five- year/five-year forward breakeven rate rose to 2.78 per cent today, compared with 2.54 per cent at the start of the year.
The five-year/five-year forward is the five-year expected inflation rate five years from now.
Discussing the rate last year, ECB president Jean-Claude Trichet said the indicator was "very important."
Policy makers are expected to hold the main refinancing rate at an all-time low of 1 per cent today
The ECB announces its rate decision this afternoon in Venice, Italy.
It raised its main rate by a quarter-percentage point to 2.25 per cent on December 1st, 2005. The rate peaked at 4.25 per cent in July 2008.
However, the ECB began cutting rates a year ago, when policy makers lowered it to 3.75 per cent as part of a coordinated reduction by central banks including the Federal Reserve, Bank of England and Bank of Canada.