Global Macro Matters:
What's Up With Global Inflation?

PGIM Fixed Income

October 09, 2017

In the first of a series, author Nathan Sheets, PhD outlines a compelling case for inflation expectations to be low, stable, and well anchored. This means that investors have good empirical reasons both for requiring low inflation compensation for holding bonds and for demanding relatively small compensation for inflation risk. The stable nature of inflation also contributes to a more stable overall macroeconomic environment, and this should tend to reduce financial risks premiums more generally.

We find a compelling case for inflation expectations to be low, stable, and well anchored. This means that investors have good empirical reasons both for requiring low inflation compensation for holding bonds and for demanding relatively small compensation for inflation risk.
 

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