Market expectations of rapid disinflation and a soft landing remain, but January has contributed a few new risks to the optimistic estimates of disinflation with no impact on the economy. The second risk comes from the significant bounce in net liquidity and effective money supply both in the United States and the eurozone. Thus, the following three months will be critical to understanding the real disinflation process and whether market estimates are too optimistic. Unless the money supply declines again, the path to reaching the Federal Reserve’s target of 2 percent inflation may be challenging. The minutes from the meeting of…
