Fed Favored Gauge of Future Inflation Nears Record Low: Chart

The market’s five-year estimate for inflation beginning five years from now, a model the Federal Reserve uses in setting rates, is approaching a record low as commodity prices tumble.

The five-year forward break-even rate projects that consumer prices will increase at a 1.6 percent annual rate starting in 2020. The gauge bottomed at 1.56 percent in January 1999. Federal Reserve Bank of St. Louis President James Bullard, a traditional inflation hawk, called the decline in market-based inflation expectations “worrisome.”

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