RaboResearch points out that while energy prices have continued to rise recently, 5-year forward inflation expectations in the US and Europe remain largely aligned with central bank targets. The correlation between energy prices and long-term inflation pricing is weakening, and the market currently remains willing to believe that central banks can anchor long-term inflation.
This divergence can also be explained by another factor: long-term inflation expectations may become increasingly dominated by central bank credibility, fiscal policy, and institutional risks, with the weight of short-term oil price shocks decreasing accordingly. RaboResearch specifically mentions the risk of "fiscal dominance": once the market begins to doubt the central bank's ability to independently control inflation, long-term inflation pricing may experience a sudden institutional revaluation, and such changes typically do not occur linearly.
For the market, the current stability of 5-year inflation is still a positive signal of policy credibility, but if energy prices remain high and fiscal risks rise simultaneously, whether long-term inflation expectations and term premiums continue to "blunt" will become a key observation point. At that time, the reaction of long-term US Treasury bonds to oil price and inflation shocks may reflect whether the market still believes in the inflation anchor more clearly than the monthly CPI itself.
