Mullaney Keating & Wright

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WHERE IS THE INFLATION

Despite the worries of the inflation hawks we have had very little inflation since the Great Recession.  For those of us that think that active markets are good predictors of the future, a  way to see what the smart money expects for future inflation is to subtract Treasury Inflation Protected Securities (TIPS) rates from nominal treasury yields.  As of Friday’s rates that puts expected inflation (CPI) in five years at 1.96% and 2.20% in ten years.  Interestingly there is also an inflation swaps market that comes to the same conclusion.  The details are spelled out in the Federal Reserve Bank of San Franciso’s Financial Market Outlook for Inflation

An equally interesting aspect of inflation is in Inflation Components from the FRB of Saint Louis.

TFM

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