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Janet Yellen Copyright Alex Wong, Getty Images

Traders Have Thrown in the Towel on U.S. Deflation Bets

Deflation is not on the horizon.

By Luke Kawa

(Bloomberg) --What is one thing making life a little easier on a Federal Reserve wrestling with the “mystery” of low inflation? At least traders don’t expect inflation’s evil cousin -- deflation -- to show up to the party any time soon.

The cost of an inflation floor that compensates its holder should the annual change in the consumer price index dip into negative territory a year down the road has fallen below a cent -- its cheapest level since May 2011, when crude oil futures reached $100 per barrel.

The latest leg of softness in the U.S. dollar inflation floor swap isn’t likely related to the synchronized global expansion or confidence about the outlook for growth, but rather reflects the expected short-term effects the hurricanes will have on U.S. pricing pressures via select commodities.

 
 
To contact the reporter on this story: Luke Kawa in New York at [email protected] To contact the editors responsible for this story: Jeremy Herron at [email protected] Randall Jensen, Dave Liedtka

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