Economics
Decoding Gauges of Inflation Expectations Is Fed’s Next Big Task
- New Fed stance ‘puts them front and center’: D.E. Shaw’s Sack
- Neither market- nor survey-based measures are seen as perfect
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The Federal Reserve is determined to push inflation higher from levels it considers dangerously low. For that to happen, it must first convince everyone that prices will accelerate in coming years.
One big problem is that the measures that bond traders and strategists rely on for longer-run inflation expectations can often give conflicting and confusing signals. No one can agree on how best to use or decipher them, with even the Fed seemingly reticent to narrow it down; its economists recently reviewed a cocktail of more than 20 gauges. Yet depending on which measure is considered, inflation is still well short of the Fed’s average 2% goal -- or may have already exceeded it.