Wall Street economists are clashing with Wall Street traders over whether inflation is poised to awaken around the world after a long slumber.
From Morgan Stanley to Bank of America Corp. there's a growing chorus of economists siding with Federal Reserve Chair Janet Yellen's "best guess" that price pressures will soon gain momentum, paving the way for the Fed and other key central banks to continue unwinding ultra-loose monetary policy in a gradual fashion.
The message is still to fully get through to financial markets. The U.S. Treasury bond yield curve has flattened and German bond yields fell even after the European Central Bank announced plans to slow stimulus. JPMorgan Chase & Co. economists say markets assume inflation-adjusted interest rates in developed economies will stay below zero until 2019.