Citi says markets mispricing downside risks for inflation heading into the May inflation | Forexlive

Bloomberg (gated) convey the info from a Citi note saying

• “We do not think markets have been adequately pricing downside risks for inflation heading into the May inflation release,”
• like five months ago, the market is coming off two consecutive lower-than-forecast CPI prints
• Yet inflation expectations over the next couple of years are currently higher than they were at the beginning of 2023, despite tighter financial conditions, lower year-over-year inflation and higher unemployment and jobless claims
• and says core inflation is set to fall meaningfully below 0.4% m/m in May for the first time since November

I posted previews earlier for the inflation report due today, in which analysts warn that higher than expected core inflation will trigger a rate hike from the Federal Open Market Committee (FOMC) on Wednesday:

Citi are thinking the risk is the other way though.

Fed Funds: