Citi: The market is too complacent about US inflation, betting on a rebound in inflation is becoming attractive

According to Odaily, Benjamin Wiltshire, a senior rates strategist at Citi, stated that investors may be underestimating the resilience of U.S. consumers, and there is still some room for a slight upward revision in market inflation expectations. "The market seems convinced that inflation will continue to decline, but we are still in a structurally high inflation environment." He recommends buying 5y5y forward inflation contracts, noting that the current pricing level of around 2.5% is too low—while the Federal Reserve's preferred core inflation indicator remains stubbornly just below 3%. Wiltshire pointed out that, given last year's disappointment in the market due to the delayed transmission of U.S. tariff policies, traders are now quite hesitant in pricing inflation risks. "The momentum for pricing in inflation premiums is gone; structurally, inflation is clearly being underestimated." (Golden Ten Data)