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Deutsche Bank: TIPS Show Inflation Peaking In February


Deutsche observes ahead of tomorrow's January CPI print that market-implied pricing for the timing of the Y/Y peak in inflation has been pushed back to February, vs January previously. TIPS traders "expect inflation to be stickier" compared to last month's expectations, "with a more substantial increase for next month's print and 7-plus percent CPI to last through March".

  • That "raises the stakes" ahead of the March FOMC where of course markets are
  • considering the potential for a 50bp liftoff.
  • And " if inflation proves to be stickier instead, such as what the TIPS
  • market is suggesting, and if the path of peak inflation keeps getting pushed back, expectations for more aggressive action could build, and the Fed may find it more difficult to communicate restraint despite inflation falling soon after the liftoff."
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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