E The Fed And Bond Market Similar Inflation Views

Nonetheless, the 5-year market-embedded inflation rate implies what the market thinks US inflation will average over the next five years. And as the following two charts illustrate, the five-year inflation rate has been rising over the past twelve months.

Indeed, as of early April, the five-year future average inflation rate was estimated to be 2.53%, the steepest inflation pace since July 2008.

In conclusion, the market's 2.5% five-year expected inflation rate is, in a strange way, comforting, since it is roughly consistent with what the Fed desires based on its 2% optimum inflation path. 

Indeed, for some time now Fed officials have expressed the worry that the actual rate of inflation was too low relative to its 2% target.

In other words, there should be some comfort in the fact the Fed and the bond market are roughly consistent in terms of their expectation for future inflation.

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William K. 1 month ago Member's comment

Pushing for inflation is a lot like shooting a gun into a crowd. Some folks are going to be hurt. So why is the fed bank doing what it knows will hurt most people and will only benefit the money crowd. Something is terribly wrong with that. And yet they have been doing it, very intentionally, for many years.

Perhaps it is time to stop fueling inflation.

Norman Mogil 1 month ago Contributor's comment


Do we know what amount of inflation above 2% will the Fed tolerate and for how long? Kinda of vague on their part.