The oil shock is impacting inflation expectations, with financial market pricing suggesting a near-term cost-of-living burst that typically subsides over the longer term. The only way to gauge this inflation burst is to monitor expectations of investors, businesses, and households. If these expectations rise due to oil, it indicates that the main economic actors doubt central banks' ability to contain inflation. This could lead to higher wage demands, increased pricing by companies, and inflation that becomes self-sustaining. The U.S. one-year inflation swap, which prices in expected spot consumer price inflation, has surged to 3% for the first time since October. Meanwhile, expectations embedded in the inflation-protected Treasury bond market have also increased, with the so-called "breakeven" inflation assumption rising to 2.65%, its highest level in over a year.