by Reuters
Kitco
NEW YORK, April 1 (Reuters) – Investors in financial derivatives called U.S. inflation swaps are betting that President Donald Trump’s tariffs will have a hefty short-term impact on consumer prices that will recede in the next few years as recession concerns escalate.
Inflation swaps are used to hedge against a rise in prices. They have two participants: the receiver and payer. The receiver seeks protection against rising inflation, while the payer, typically a bank, assumes the risk tied to inflation.
Specifically, the receiver agrees to exchange with the payer a fixed amount for floating payments tied to the Consumer Price Index (CPI) for a given notional amount and period of time.