The likeliest inflation profile in OECD countries: Very low for a few years, then quite high in the very long term

Financial markets expect inflation in OECD countries to remain stable at a moderate level. But we believe that another inflation profile is likelier: Deflationary pressures will be strong for a few years as excess savings have been increased by the COVID crisis, leading inflation to remain very low; In the long term, the combination of population ageing (which may turn the excess savings into a savings shortfall) and the energy transition (due to the much higher price of purely renewable energy) are likely to lead instead to relatively high inflation. Financial markets therefore probably expect inflation to be too high in the short term and too low in the long term, which means that yield curves will steepen for the longest maturities.