What drives low market-based inflation measures?: A TECHNICAL DECOMPOSITION OF THE INFLATION-LINKED SWAP RATE
| Autor: | Broeders, Dirk, Goy, Gavin, Petersen, Annelie, de Vette, Nander |
|---|---|
| Přispěvatelé: | Finance, RS: GSBE Theme Human Decisions and Policy Design, RS: GSBE Theme Data-Driven Decision-Making |
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Zdroj: | Vba Journaal, 14-18 ISSUE=141;STARTPAGE=14;ENDPAGE=18;ISSN=0920-2269;TITLE=Vba Journaal |
| ISSN: | 0920-2269 |
| Popis: | Central banks and investors critically monitor market-based inflation measures as key indicators for medium-term inflation expectations. Market-based measures of inflation expectations have experienced a sharp decline over 2019. The euro 5y5y inflation-linked swap rate has fallen from 1.8 percent at the beginning of 2019 to a level of around 1.2 percent at year’s end. This sharp decline raises the question what drives the low market-based inflation measures. We show that a large part of this decline is likely to be attributed to a fall in the inflation risk premium. This implies that nominal bonds are no longer an ‘inflation bet’ but rather a ‘deflation hedge |
| Databáze: | OpenAIRE |
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