US: Inflation Expectations Are Falling


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:

5yr breakeven

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.


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