Market participants have distorted expectations on how much consumer prices will change in the future, an economist told CNBC Thursday.
Inflation has been a major factor in how markets have performed. Stronger-than-expected labor data in the U.S. as well as consumer prices have been interpreted as a sign that inflation is about to pick up at a fast pace after years of moribund growth. Such data releases earlier this month have pushed up sovereign debt yields and even fueled an equity market sell-off.
"A market that reacts negatively to a 2.9 percent wage increase and record-low unemployment is a troubled one," Daniel Lacalle, chief economist at Tressis Gestion said in a note, referring to official data in February that showed an increase in hourly wages in the previous month. "That is not bad for anyone," he said about higher wages.
Speaking to CNBC Thursday morning he added that "inflation expectations in consensus are overblown, are too high even considering the wage numbers in January."