Reflation Trades Face Reality Check With Fed’s New Goal in Doubt
- Fed inflation switch spurs curve steepening that faces tests
- Latest data show central bank’s 2% target is still far away
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The bond-market reflation bets that have proven popular in the recovery from the March market cataclysm now face tougher odds.
Positions favoring a steeper yield curve and inflation-protected securities got a boost last week when Federal Reserve Chair Jerome Powell announced the central bank is shifting its 2% inflation target to an average over a so-far unspecified horizon, implying greater tolerance for an overshoot.