Reflation expectations too soon? - ANZ

Analysts at ANZ explained that in the latter part of 2016 financial markets appeared to enthusiastically embrace the reflation thematic.

Key Quotes:

"Indeed, equities rallied, bonds sold off and market-based measures of inflation expectations picked up sharply.

However, while the pickup in headline inflation has been pronounced, pricing pressures are not broadly based. Indeed, core inflation in many countries remains subdued and little changed.

Further, at present, diffusion indicators suggest that price increases are narrowly based.

We conclude there isn’t much inertia in pricing pressure in the main advanced economies, as below trend wage growth and sizeable output gaps continue to anchor core inflation."