The writer is group chief economist at Société Générale
The lively debate on the volatile, new inflation landscape is palpable in markets. It is not just a matter of how different drivers may affect rising prices but also the consequences that this entails for interest rates.
Even in May, we have seen substantial shifts in markets as investors have sought to price the likely responses from central banks to the inflation surges.
The transatlantic divide in benchmark 10-year bond yields in the US and Germany rose to 2.0 percentage points in early May but has since narrowed by 0.30 points. The reduction in the gap in real yields after taking into account inflation has been even more impressive, falling by almost 0.70 points in May.
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