Capital Perspectives: Inflation risk revisited By: Chas Craig Guest Columnist April 6, 2021
Chas Craig
Last June I wrote a column entitled “Inflation Risk” for
The Journal Record. I stated that “common sense dictates that government deficits and the resulting debt can’t be monetized via Fed purchases of Treasury obligations in increasing amounts without causing an inflationary impulse at some point.” The point was not so much that I had a high level of conviction that inflation would spike, but that the market seemed very certain that it wouldn’t. The difference between 30-year nominal and inflation protected Treasury bonds (the breakeven rate), a rough estimate of the market’s expectation for average inflation over the period, registered at roughly 1.5% at the time, a level well below the Fed’s goal of averaging 2%.