If the start of 2021 led markets to question the no inflation forever mantra, the debate has been hotting up in February, with the US 10Y inflation breakeven reaching its highest level since 2014, pricing in higher inflation expectations. We are also seeing pricing pressure on the food and energy side.
Despite this rising trend, absolute inflation levels remain subdued. Some inflationary pressure is more than expected this year on base effects. However, the problem is not this short-term rebound of inflation, but the change in the paradigm ahead. The hot questions today are how much inflation surprise can we envisage for 2021 and how temporary will this inflation pick-up be?
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