Traders are about to find out just how worried Federal Reserve officials are about the outlook for inflation. The depth of that angst has ramifications for the U.S. bond market’s dominant trend: the flattening yield curve.
Fed Chair Janet Yellen and the nominee to succeed her, Jerome Powell, lead a busy lineup of central bankers speaking this week. They may opine on inflation after minutes of their most recent meeting published last week showed several policy makers were concerned about low expectations for consumer-price gains and underscored that further interest-rate hikes will hinge on economic data. It’s only fitting, then, that the Fed’s preferred gauge of price growth will also be released this week, with a survey of economists indicating it’s likely to slow to a 1.5 percent year-on-year pace.