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Further Reading: Could inflation soon reach 10 per cent?

Inflation expectations are rising. They might have to rise a lot more.
Further Reading: Could inflation soon reach 10 per cent?
  • Pandemic stimulus efforts have got people talking about inflation
  • Changing demographics are a far bigger threat, argues a recent book

Inflation, inflation, inflation. In relatively short order, concerns about rising prices and too much money in the system have leapt to dominate the financial news media agenda.

One key signal is that bonds are selling off. This month, the five-year breakeven inflation rate – an interest rate spread that acts as a proxy for inflation expectations – hit 2.5 per cent for the first time since the Great Financial Crisis. That has sparked investors to rank inflation as the new number one market risk, according to Bank of America’s closely-watched monthly survey of global asset managers. Step aside Covid-19, there’s a new source of fear in town.

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