Asset Allocation: Market Analysis - Europe - Inflation claims are full of hot air.

Byline: Andrew Bosomworth

Look around and you might think that inflation in the euro-zone is about to rear its head. The economy grew at a stellar 3.6 per cent annualised real rate in the fourth quarter of last year and some of Germany's trade unions are indeed demanding hefty wage increases after years of restraint. In reality, consumer price inflation is far more likely to remain in line with the European Central Bank's "close to but below 2 per cent" objective.

Inflation will largely be influenced by developments in energy prices and labour costs in the