Join our community of smart investors
Opinion

US inflation "to rise"

US inflation "to rise"
May 28, 2015
US inflation "to rise"

Bond markets share these concerns; the five-year break-even inflation rate (the gap between yields on nominal and inflation-proofed Treasury bonds) has risen from 1.3 to 1.65 percentage points since February.

If this is right, US interest rates could rise faster than markets expect. Fed funds futures markets are pricing in only a quarter-point rise by the end of the year - an opinion which, says Ms Marcussen, "is too complacent." It might also matter directly for UK equities. There has for years been a strong correlation between core US CPI inflation (the rate excluding food and energy) and the dividend yield on the All-Share index (of 0.64 since 1985), which implies that higher US inflation could mean lower UK share prices.

This is subscriber only content
Start your trial to keep reading
PRINT AND DIGITAL trial

Get 12 weeks for £12
  • Essential access to the website and app
  • Magazine delivered every week
  • Investment ideas, tools and analysis
Have an account? Sign in