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U.S. inflation expectations have surged to the highest in a decade as the economy reopens from COVID-19-related shutdowns, putting investors at odds with the Federal Reserve which sees price pressures still far from its target.
Inflation expectations as measured by breakevens on Treasury Inflation-Protected Securities (TIPS) over the coming five years jumped to a 10-year high of 2.73% on Monday.
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The jump comes at the same time that Fed policymakers talk down inflation expectations, saying near-term inflation will be transitory and that there are challenges in reaching their average target of 2% on an ongoing basis.
Given its broad exposure to all major asset classes, and its long-term track record, many investors use it as their one and only investment holding. The trust was launched 39 years ago.
by Greg Brown and Arzu Ozoguz, Kenan Institute May 6, 2021 .
The chatter around inflation is increasing. In March, the Consumer Price Index (CPI) was up 2.6% compared with a year ago, when demand for many goods and services evaporated and the pandemic pushed the economy into a tailspin. This jump from February’s 1.7% rate was partly expected because the pandemic’s depression of prices began in the spring of 2020.
But there may be more to the rising speculation about inflation. Prices jumped by 0.6% in March alone, and the core Consumer Price Index, which excludes more volatile energy and food prices, was up by 0.3%. Commodities such as aluminum, copper and lumber are trading near all-time highs. Businesses from homebuilders to manufacturers to household goods providers are sounding alarms over supply-chain bottlenecks and mounting raw material costs. Major consumer brands are announcing plans to raise prices. Hotel, car rental and air travel rates are all up, adding significa
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