The EONIA is expected to go above zero only in 2019 and reach 2% in ten years-time. On the other hand, market expectations of ten years German and Spanish sovereign bonds yields five years from now are respectively 1.5 and 3.3 and only move to 1.76 and 3.9 when assessed ten years from now (Figure 5, RHS).
With the economy projected to continue to operate near capacity, and with inflation expectations firmly anchored, inflation is expected to return to 2 per cent by the end of 2006. To support aggregate demand, the Bank has held the target for the overnight rate unchanged at 2½ per cent since October 2004.