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Data: FactSet; Chart: Axios Visuals

The markets are more optimistic about growth and inflation than they have been in over four years.

Driving the news: That's the signal being sent by the U.S. Treasury bond yield curve, where 10-year notes now yield a full percentage point more than their one-year equivalents.

  • That might not seem like a lot, but in a world of zero interest rates, it's important. It's a sign the markets are betting that Fed policy will work in terms of creating inflation — something it has signally failed to do over the past decade.

By the numbers: The 10-year breakeven inflation rate — a measure of inflation expectations — has risen to 2.19%, its highest level since 2014.

  • The Fed has said that it wants to see inflation above 2% for some time before it starts raising interest rates.

The bottom line: Inflation is an important part of what the economy needs right now.

Go deeper

Dion Rabouin, author of Markets
Feb 4, 2021 - Economy & Business

Inflation expectations are highest since 2013

Expand chart
Data: Federal Reserve Bank of St. Louis; Chart: Axios Visuals

U.S. inflation expectations continue to rise, as the 5-year breakeven rate hit its highest in nearly eight years on Wednesday.

What's happening: Inflation expectations are climbing at a torrid pace thanks largely to massive lending by the Fed and big government stimulus programs, with both expected to continue at a sizable pace for some time.

Dion Rabouin, author of Markets
Feb 4, 2021 - World

Trouble brewing in the eurozone

Illustration: Sarah Grillo/Axios

Increasing lockdowns, a mutating virus and a botched vaccine rollout have the eurozone headed for a double-dip recession, weighing heavily on its currency and pushing the dollar higher.

Why it matters: The weak dollar (down 10% from its 2020 highs) has been a linchpin for some of the biggest consensus trades this year — strong commodities, skyrocketing U.S. equity prices and emerging market stocks and bonds.

1 hour ago - World

Olaf Scholz sworn in as German chancellor, succeeding Merkel

Incoming German Chancellor Olaf Scholz is sworn in by Bundestag President Bärbel Bas in Berlin today. Photo: Sean Gallup/Getty Images

Social Democrat Olaf Scholz was sworn in as chancellor of Germany on Wednesday, succeeding Angela Merkel after 16 years and launching a new era of German and European politics.

Why it matters: Scholz, a center-left pragmatist who served as finance minister and vice chancellor in Merkel's last government, will lead Europe's largest economy in a coalition with the environmentalist Greens and pro-business Free Democrats.