Citigroup: Markets are too complacent about US inflation; betting on a rebound in inflation is becoming attractive.

According to ME News, on February 12 (UTC+8), Benjamin Wiltshire, senior interest rate strategist at Citigroup, stated that investors may be underestimating the resilience of US consumers, and market inflation expectations still have room for a slight upward revision. "The market seems convinced that inflation will continue to decline, but we are still in a structurally high inflation environment." He recommended buying 5-year 5-year forward inflation contracts, stating that the current pricing level of around 2.5% is too low—the core inflation gauge favored by the Federal Reserve remains stubbornly holding steady at slightly below 3%. Wiltshire pointed out that given the widespread disappointment in the market due to the sluggish transmission of US tariff policies last year, traders are currently quite hesitant in pricing inflation risk. "The momentum for pricing in an inflation premium has disappeared, and structurally, inflation is clearly undervalued." (Source: ME)