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1/2 1-year inflation swaps are useful — like a point spread. That doesn’t mean you should treat them like a sure thing. Before last year’s Super Bowl, the Chiefs were about a 1½-point favorite. The Eagles won by 18 (40–22). The line told you something. The final outcome was something else. Same idea with 1-year inflation swaps. They are a real market signal. They are not a precise forecast of where inflation will be in a year. The chart shows the miss: on average, the swap has been too low on inflation (red below blue since 2020), and the errors get large during regime shifts (2022) — exactly when people lean on these numbers the hardest. Don’t assign too much precision to inflation swaps. 2/2 Since early July, crude (black) has jumped hard while 1-year inflation swaps (red) have fallen. This is not a normal wiggle. Swaps traders are reading energy as a one-off and expect the shock to fade. This will cause the oil to work its way back down. Maybe this scenario plays out, but I don't see a lot of military strategists on swaps desks, and, given the error rate above, take their oil path or the inflation outcome cautiously.