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

Citigroup senior interest rate strategist Benjamin Wiltshire said investors may be underestimating the resilience of U.S. 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 recommends buying 5-year 5-year forward inflation contracts, saying the current pricing level of around 2.5% is too low—the Fed's preferred core inflation gauge 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 U.S. tariff policies last year, traders are currently quite hesitant about pricing in inflation risk. "The momentum for pricing in an inflation premium has disappeared, and structurally, inflation is clearly undervalued." (Jinshi)