Favorite Bond Market Inflation Gauge Set to ‘Cross the Rubicon’
- 5-year, 5-year forward rate is now consistent with Fed goal
- Former NY Fed markets’ group head warned in June on last rise
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One of the bond market’s most closely followed monitors of long-term inflation expectations is suggesting that the Federal Reserve may be at risk of losing control over rising pricing pressure.
The so-called 5-year, 5-year forward breakeven inflation rate, is close to a level it hasn’t consistently held above for about seven years. It’s the second time in recent months that the gauge has flashed such a warning. In May, a similar rise prompted Brian Sack, the former head of monetary and financial market analysis at the Fed Board of Governors who had championed the use of the measure to guide policy, to join other prominent voices to warn the central bank needed to signal a policy adjustment.