Low Growth and Low Inflation Expectations in the Post–COVID-19 World: A Market-Based Perspective

3 Pages Posted: 15 Apr 2021

See all articles by Rohit Goel

Rohit Goel

International Monetary Fund (IMF)

Sheheryar Malik

International Monetary Fund (IMF)

Xingmi Zheng

International Monetary Fund (IMF)

Date Written: October 1, 2020

Abstract

Recovering from the COVID sell-off, inflation brekaeven increased sharply in the second half of 2020 while real yields declined materially. The analysis decomposes the inflation breakevens to strip out the role of inflation expectations and risk premia. Despite evidence of upward movement in five-year market-implied inflation expectations after the March sell-off, especially in the United States, such recovery appears to represent more of a reversion toward a preexisting downward trend that emerged after the global financial crisis.

Keywords: Inflation, monetary policy, risk premia, inflation breakeven, market implied densities

JEL Classification: E31, E43, C58, G15

Suggested Citation

Goel, Rohit and Malik, Sheheryar and Zheng, Xingmi, Low Growth and Low Inflation Expectations in the Post–COVID-19 World: A Market-Based Perspective (October 1, 2020). Available at SSRN: https://ssrn.com/abstract=3826500 or http://dx.doi.org/10.2139/ssrn.3826500

Rohit Goel (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Sheheryar Malik

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Xingmi Zheng

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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