Report
Why are inflation expectations so low?
We note that inflation expectations in the United States and the euro zone, beyond 2023, are still very low. For example, the 2-year inflation swap in 1 year is 2. 4 % in the United States and 2.2% in the euro zone; the 5-year inflation swap in 1 year is 2. 5 % in the United States and 2.2% in the euro zone, the 10-year inflation swap in 1 year is 2. 5 % in the United States and 2. 3 % in the euro zone. Financial markets therefore do not believe that new sources of inflation will emerge. Yet the energy transition, new labour market situations and reshoring are all inflationary. In all likelihood, financial markets’ expectations of future inflation are severely underestimated, which also means that short-term and long-term interest rates are severely underestimated.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
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