Signs that investors in the US bond market are beginning to anticipate higher inflation would be a "significant red flag" that could derail rate-setters' plans to cut rates, the chairperson of the Chicago Fed and a member of the FOMC has warned.
Mr. Goolsby's comments came a week after a closely watched University of Michigan poll showed US households' long-term inflation expectations hitting their highest level since 1993. "If you see market-based long-term inflation expectations starting to change as they have in the last two months, I would consider that a significant red flag to be very concerned about," Mr. Goolsby said. The five-year forward rate is currently 2.2 per cent, while the University of Michigan survey shows consumers expect long-term inflation at 3.9 per cent.
Mr. Goolsby said the Fed would have to act if investor expectations started to converge with those of US households: "You have to deal with this almost in any case," he said.
The Federal Reserve's voting committee warns that rising inflation expectations will stand in the way of "interest rate cuts"
2025-03-26 05:32:51
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