Traders Cut Inflation Outlook by Most Since Early 2020
- Five-year breakeven set for biggest weekly drop since 2020
- Decline has come in wake of omicron fear, pivot by Powell
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Bond traders have slashed their inflation expectations, putting the so-called breakeven rate for Treasuries linked to consumer-price gains over the next five years on track for its biggest one-week drop since the early months of the Covid pandemic.
Concern about the newly emergent omicron variant has combined with a hawkish pivot from U.S. central bank boss Jerome Powell to tamp down inflation fears, although the expected rate of gains still remains substantially above the Federal Reserve’s target of about 2%. A drop in oil prices Thursday could also add downward pressure to the inflation outlook.