This is weird, while the Federal Reserve inflation target is now at hand, it looks like the market is really not seeing the 2% inflation as something that will really happen
Keep in mind that, as we always say, the market is always right, even when it’s wrong:
Inflation is coming (technically, it’s already here), so how can we justify this big drop in the inflation expectations ?
There are basically two reasons:
1) China does not want to print money as Fed and BOJ did to boost growth
2) The US had a deflation-moment (month on month) in August
Reason 2 may explain the recent drop in inflation expectation, but, as you can all imagine, reason 1 is still the main issue here.