Citi: Market Too Complacent on U.S. Inflation, Betting on Inflation Rebound Becoming Attractive

Odaily News Citi senior interest rate strategist Benjamin Wiltshire stated that investors may be underestimating the resilience of U.S. consumers, and there is still room for a slight upward revision in market inflation expectations. "The market seems convinced that inflation will continue to decline, but we are still in a structurally high inflation environment." He recommended buying 5y5y forward inflation contracts, stating that the current pricing level of around 2.5% is too low—the core inflation indicator favored by the Federal Reserve remains stubbornly stable at just below 3%. Wiltshire pointed out that given the widespread market disappointment last year due to the delayed transmission of U.S. tariff policies, traders are currently quite hesitant in pricing inflation risks. "The momentum for pricing inflation premiums has disappeared; structurally, inflation is clearly being underestimated." (Jin10)