What can we make of expected inflation and real long-term interest rates in financial markets?

In the United States, the 10-year inflation swap is 2. 6 0%, and the real 10-year interest rate calculated with the inflation swap is 2. 0 0%. If we look at inflation excluding rents imputed to homeowners, it is currently (March 2024) 2.6% year-on- year; potential growth (the sum of the trend in productivity gains, the growth in the employment rate and the growth in the working-age population) is 2.5% per year. In the United States, when comparing long-term expected inflation in financial markets and real long-term interest rates with actual inflation and potential growth, we do not see much difference. In the euro zone, the 10-year inflation swap is 2. 2 % and the real 10-year interest rate calculated with the 10-year inflation swap is 0.8%. Headline inflation was 2.4% in April 2024, inflation excluding energy and unprocessed food was 2.8 % year-on-year, still in April 2024. Potential growth in the euro zone is very low, since productivity gains are zero and the working-age population is shrinking. Potential growth is only positive because the employment rate is rising ; it can be estimated at 0.8%. When comparing long-term expected inflation in financial markets and real long-term interest rates with actual inflation and potential growth, we see that the only difference is between expected inflation and actual core inflation in the euro zone.