At Any Rate US Rates - Monthly inflation outlook: Looking for value amid global inflation cross-currents
Feb 27, 2025
Explore the intriguing dynamics of global inflation as experts analyze recent CPI data and the narrowing of break-even rates. Gain insights into how shifts in market sentiment and tariff uncertainties influence economic resilience. Discover the contrasting inflation trends in Europe, particularly in the UK and Euro area, alongside predictions shaped by energy prices. Finally, dive into a comparative look at breakeven inflation rates between Australia and the US, shedding light on differing economic policies and investor implications.
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Market Inflation Expectations vs. Reality
- Market measures of inflation expectations have fallen despite stronger headline inflation figures.
- This disconnect suggests markets might be downplaying the impact of recent inflation surprises.
US Break-Even Valuation
- US break-even rates have fallen to the low end of their range, but fundamentals suggest they should be higher.
- Factors supporting higher break-evens include a resilient economy, sticky core inflation, and tariff uncertainty.
UK and Euro Area Inflation Dynamics
- UK and Euro area break-evens have also narrowed, especially at the front end of the curve, mirroring US trends.
- However, differing inflation trajectories between regions mean opportunities vary, with UK RPI offering more short-term upside potential.