In Bond-Market Irony, Inflation Is Lower Than When Fed Eased
- Central bank may raise rates even as price gains trail target
- Debt-buying helped generate jobs, while wage gains lag behind
Fed Decision-Day: Weighing the Impact
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In September 2012, Fed policy makers found a bond-market measure predicting a 1.9 percent future inflation rate among the reasons to expand monetary stimulus by adding to their unprecedented bond-buying program.
The central bank ended its quantitative easing in late 2014 and this week may further curtail accommodation by raising interest rates, even as the same inflation gauge has slowed to 1.2 percent. The gap between yields on five-year Treasury Inflation Protected Securities and equivalent nominal debt, known as the break-even rate, is at almost its lowest level this year before the central bank’s policy statement Thursday.