What are market inflation expectations and why do they matter?
WITH stockmarkets tumbling and the oil price below $30, some economists are once again worrying about global deflationary pressure. Low inflation can be toxic for economies when interest rates are also low (see a previous Explains). One warning light that is flashing red in America is market expectations of inflation, which have plummeted to lows not seen since the financial crisis. How are market inflation expectations measured, and why do they matter?