Why Is Break-Even Inflation Falling in the United States?
Break-even inflation rate is used to assess the inflation expectation of market participants. The downturn in ten-year break-even inflation isn’t as sharp as the downturn in five-year break-even inflation.
The breakeven inflation rate is used to assess the inflation expectations of market participants.
When the Federal Reserve refers to inflation, it is talking about the rate of change in PCE inflation. This is the price index for personal consumption expenditures.
The continued slide in oil prices after a slight rebound during the second quarter has failed to deter the US consumer price index inflation rate.
Real wage growth has been improving over the last four years, mainly due to the falling inflation rate.
With global growth estimates coming down and commodities continuing to trade lower, it should come as no surprise that bond yields are once again falling.
The Federal Reserve assess inflation expectations in several ways. It looks at market surveys and household surveys.…
There are several measures of inflation. You may have heard of the CPI (Consumer Price Index) and the PPI (Producer Price Index).
On July 6, the Gallup consumer spending report couldn’t buffer the fall in the SPDR S&P 500 ETF (SPY).
Services spending appears to be on a strong and improving path. Currently, it stands at a healthy 2.8%. This shows that the economy isn’t weak.
The consumer price index, which measures the pace of price increases in an economy, rose by 0.4% month-over-month in the US in May 2015—its biggest jump since February 2013.
Lack of inflationary pressure in the US economy, even after strong jobs growth, points to two facts.
Yields on TIPS are still very low, but some investors are tilting toward TIPS. It’s not a bad idea to hold on to some of these securities before inflation rates start heading northward.
Another stellar jobs report means the March number was just an aberration rather than the new norm. This, in part, caused U.S. Treasury yields to back up.
TIPS give investors a hedge against inflation, like gold and other commodities. This protection, however, comes at the cost of lower coupons.
Another volatile input in the consumer price index is the price of food. This was unchanged month-over-month in April, and was up 2% from a year ago.
A rebound in jobs created hints that 1Q15’s tepid growth could be an aberration. Wage growth has shown signs of picking up. Low consumption, as reflected in April’s flat retail sales growth, is worrying.
Policymakers have become confident about the trajectory of crude oil prices. This gives them confidence about PCE inflation returning to its favored trajectory.
PCE inflation has been rising slowly. This has given monetary policymakers the blues. Policymakers have a specific target of 2% for real PCE inflation.
The Consumer Price Index rose by 0.2% month-over-month in March, the same pace as February. The rise was mainly driven by rising gasoline prices.