Three key things to know about the inflation figures

The market is underpricing the asymmetry between near-term headline disinflation and later-stage sticky inflation. Energy is the fast variable: if crude and pump prices stay contained, headline CPI can roll over in the next print or two, which should keep front-end yields anchored and compress rate-volatility premia. But the slower pass-through into food and services means the disinflation story is fragile; the more relevant question for rates is not the next CPI print, but whether second-round effects show up in wages and retail pricing over the next 3-6 months.

For borrowers, the more interesting second-order effect is mortgage transmission. Even without an imminent policy move, fixed-rate pricing can continue easing if markets keep fading terminal-rate expectations. That supports housing affordability and lengthens the runway for rate-sensitive equities, but it also creates a false sense of relief: if food inflation resurges in summer, lenders will reprice quickly, while households will feel the squeeze with a lag. The winners are highly selective retailers with pricing power and private-label mix; the losers are discretionary retailers and hospitality names that rely on volume, as stretched consumers are already trading down.

The contrarian view is that the inflation impulse may prove less persistent than consensus fears because consumers are now much less able to absorb price increases than in 2022. That matters: if households have already exhausted trade-down options, margin recovery for food producers could disappoint even if input costs stay elevated. The real tail risk is policy complacency—if the central bank waits for certainty, it may be forced to react later to a sticky food/services print, which would steepen front-end yield volatility from today’s relatively calm levels.