US economic outlook: markets signal rising inflation and interest rate risks

The US economy continues to benefit from vaccination rollout and stimulus, with states targeting full reopening by mid-summer. Inflation expectations and long-term interest rates are currently stable, but markets are pricing in higher upside tail risk for both as a result of rising commodity prices and increasing concerns over economic overheating.

The key takeaways are as follows:

  • Inflation expectations stabilize higher on rising input prices and a dovish Fed.
  • Markets signal rising tail risk in long-term interest rates, given low real interest rates and high inflation tail risk.
  • Weak April payrolls are balanced by continued strength in other data.

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Economic Outlook US economic outlook: markets signal rising inflation and interest rate risks

SEE ALSO FORMER ECONOMIC OUTLOOKS