Economics
Powell’s Hawkish Tone Fails to Tamp Down Inflation Expectations
- Long-run inflation forward expectations at highest since 2014
- Ten-year TIPS breakeven rate rose to a record this week
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Federal Reserve Chairman Jerome Powell is amping up his hawkish tone. Still, the U.S. central bank’s favored bond-market measure of long-run inflation expectations keeps rising. That’s a problem.
A day after Powell outlined his most aggressive approach to taming inflation to date, the so-called 5-year, 5-year forward breakeven rate, which measures investor expectations for price pressures over the half decade that begins in 2027, reached its highest since mid-2014, according to data compiled by Bloomberg. The Fed has used that measure since the early 2000s to help guide policy; they have their own model, which as of its latest update on April 14 was at its 2022 high.