Market At Odds With Fed As Inflation Expectations Hit 10-Year Highs

• 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.
• 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.
• Prices of commodities, houses and other goods and services are jumping as the government increases fiscal spending while the Fed also maintains low rates and unprecedented bond purchases. As the economy reopens, investors are also pondering whether the Fed will be too slow in reacting to price increases, or if the market has gotten ahead of itself in pricing them in.

(Source: Reuters)