Market inflation expectations post FOMC

Combined with the recent rise in commodity prices (CRB raw industrials index, which doesn’t include energy prices, is less than 1% from its record high) and the Fed’s reiteration yesterday that they badly want inflation, the implied inflation rate in the 10 yr TIPS has risen to 1.88% today, the highest since late June and is up 10 bps over the past two days. Also, the 5 year 5 year forward breakeven, which measures inflation expectations in 5 years for the following 5 years in order to block out the short term noise, is up to 2.56%, also the highest since June, higher by 12 bps in two days and up from 1.92% one month ago.

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