Citi: The market is overly complacent about US inflation, betting on a rebound in inflation is increasingly attractive

Odaily Planet Daily reports that senior rate strategist Benjamin Wiltshire of Citigroup stated that investors may be underestimating the resilience of American consumers, and market inflation expectations still have room for slight upward revisions. “The market seems to firmly believe that inflation will continue to decline, but we are still in a structurally high inflation environment.” He recommends buying the 5-year forward inflation contract, noting that the current pricing level of about 2.5% is too low — the core inflation indicator favored by the Federal Reserve remains stubbornly steady just below 3%. Wiltshire pointed out that, given last year’s delayed transmission of U.S. tariff policies which disappointed the market, traders are now quite hesitant to price inflation risks. “The enthusiasm for pricing inflation premiums is no longer there; structurally, inflation has been clearly underestimated.” (Jin10)