Why Oh Why Can't we Have a Better Press Corps? Joseph Nocera Edition
John Berry of Bloomberg Is Pro-Greenspan...

Inflation Expectations and the Federal Reserve

From Jim Hamilton:

Econbrowser: Forward rates and inflation expectations: Forward rates on Treasury bonds tell an interesting story about the market's reaction to the Fed's interest rate cut on Tuesday.... One could calculate such a forward rate using either the usual nominal Treasury bonds, or using Treasury Inflation-Protected Securities.... The difference between those two forward rates... might be interpreted as the inflation rate that market participants anticipate to hold in the future....

As the news arrived that the Fed was cutting its target for the fed funds rate, this measure of expected future inflation moved rather dramatically. Although the abruptness of the adjustment is impressive, we need to remember the scale... only... 0.05%.... [P]eople who were betting that we'd see a 2.53% average annual rate of increase of the CPI between 2012 and 2017 are now anticipating something like a 2.58% average annual rate...

Comments