Traders Sound Policy-Error Alarm as Inflation Outlook Dives
Have Conditions for Fed Rate Hike Liftoff Been Met?
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The bond market is sending a warning to the Federal Reserve: a false step could leave the U.S. bogged down in a disinflationary quagmire well into the next decade.
The Fed has pumped almost $4 trillion into the financial system through debt purchases and kept interest rates near zero for seven years to help push price gains toward its 2 percent target. Yet break-even rates -- the gap between fixed-rate and inflation-indexed Treasuries -- suggest investors see a growing risk policy makers will drive prices in the other direction if they start raising interest rates next month.