Graph 10 Year Breakeven Inflation Rate FRED St Louis Fed

Must-Read: Scott Sumner: The Case for Tightening Is Getting Weaker and Weaker: "The recent plunge in TIPS spreads is reaching frightening proportions...

...5 year = 1.09%. 10 year = 1.42%. 30 year = 1.61%. Yes, I know they can be distorted by illiquidity, but they are not THAT far off market expectations. And don’t forget they predict CPI inflation, which runs about 0.3% above the Fed’s preferred PCE. In essence, the Fed has a 2.3% inflation target. They aren’t likely to hit it. Also recall that since 2007 the Fed’s been consistently overly optimistic... markets have been more pessimistic, and more accurate. Also recall that Fed policy has a big impact on the global economy. Also recall that the global economy seems to be moving into a disinflationary cycle.... Given there is basically no upside from tightening now, the Fed’s got to ask itself one question: “Do I feel lucky today?”