Chart of the Day – Inflation Expectations Are Not Well-Anchored

Chart of the Day – Inflation Expectations Are Not Well-Anchored

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Source: Bloomberg

The University of Michigan monthly sentiment survey shows that consumers expect much higher inflation for a long period of time.  The mean expectation for Inflation 5-10 years from now has hit a multi-decade high, up 5.3% yoy. This is nowhere in the ballpark of the Fed’s target of 2% inflation. 

You can argue all you want about how terrible this survey is, how it’s politically biased, how it only surveys 400-600 people, whatever. Be Triggered. The data is the data. 

Inflation expectations are not well-anchored in America regardless of what the Fed tells you. Folks are expecting much higher prices for a long time into the future. When inflation expectations are not well-anchored, the Fed has to work harder with monetary policy in order to bring those expectations down. That means tighter monetary policy for longer than people realize, which will be a further headwind for growth for a longer period of time. This does not bode well for risk assets. Trade accordingly. 

For more real-time market color and an idea of how I am trading this, consider subscribing to my paid service where you will get access to the Private Discord Channel where I am communicating with folks throughout the trading day.

 





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