• With monetary conditions remaining lax and fiscal policies increasingly expansionary at a global level, growth in the world economy is likely to remain above potential.
• In a context of increasingly reduced spare capacity, demand that grows above supply will progressively translate into more dynamic behaviour in terms of both prices and wages (the latter, in fact, are already showing obvious signs of acceleration in many economies, starting of course with the US).
• Once this scenario becomes clearer, it is quite possible that the premium term in the risk-free rate curves will recover significantly, meaning a significant upward movement in long-term rates.

What are the possible triggers for movement such as this in the coming months?

Although it is difficult to make short-term forecasts and we cannot rule out that some indicators will be affected in the near future by the uncertainty generated by the financial markets, we venture to mention the following elements as examples of how our reflation scenario could begin to be perceived as the most probable going forward:

• Wage acceleration in the US, which is likely to be much higher than currently discounted by the market: resurrection of the Phillips curve.
• Macro data recovery in Europe, as the negative temporary factors that have weighed down 2018 dissipate. Attention here to the data in Italy and France, where signs of recovery may become particularly evident soon (in the first case due to less uncertainty and a reduction of the risk premium and, in the second case, due to the yellow vest protests losing momentum).
• An upward trajectory of core inflation in Europe thanks to growth above potential, lower spare capacity, improved wages and the relative weakness of the euro.
• Possible trade agreement between China and the US.
• Elimination of the possibility of a no-deal Brexit.
• Sustained economic activity in emerging markets.