Citigroup Warns Bond Traders Are Misreading Inflation Ahead of CPI
- Trend of softer-than-expected CPI has emerged since November
- Core CPI may ease below forecast 0.4% monthly pace, Citi Says
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Bond traders are underestimating how much Tuesday’s Consumer Price Index report will show the inflation rate dropped last month, according to Citigroup Inc. strategist Raghav Datla.
Datla’s assessment is partly based on comparing traders’ positioning now relative to back in January. Just like five months ago, the market is coming off two consecutive lower-than-forecast CPI prints. Yet inflation expectations over the next couple of years are currently higher than they were at the beginning of 2023, despite tighter financial conditions, lower year-over-year inflation and higher unemployment and jobless claims, he notes.