Bond Market Sees Risk of Inflation Falling Below Fed Target
- Ten-year breakeven rate fell to lowest level since 2021
- The move raises concern Fed is too slow to ease policy
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Two years into the Federal Reserve’s battle against inflation, bond investors are seeing a new risk: Consumer price growth is slowing too much.
A day ahead of the August inflation report, one gauge of expectations of consumer price index increases is showing that the inflation rate is in danger of falling below the Fed’s target. The central bank has long argued that persistently low inflation is as detrimental to the economy as elevated prices because it would force policymakers to keep borrowing costs too low for too long, reducing the Fed’s ability to fight off economic downturns.