Tag Archives: inflation expectations

Inflation compensation and risk sentiment

Matt Roberts-Sklar.

Inflation breakevens and inflation swap rates have fallen a lot in recent years. Big falls have often occurred amid deteriorating risk sentiment. This isn’t a new phenomenon. Looking across markets and time periods, I show that measures of financial market inflation compensation tend to fall when risk sentiment worsens. What’s more, this effect is asymmetric – inflation compensation doesn’t rise by as much when risk sentiment improves.

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Does oil drive financial market measures of inflation expectations?

David Elliott, Chris Jackson, Marek Raczko and Matt Roberts-Sklar.

Oil prices have fallen by more than 50% since mid-2014. For much of this period, financial market measures of both short-term and longer-term inflation expectations appear to have mirrored moves in oil prices, particularly in the US and euro area. But how strong is the relationship between oil prices and financial market inflation expectations, and what should we make of it?

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Filed under Insurance, International Economics, Macroeconomics, Market Infrastructure, Monetary Policy