Inflation Lacks Persistent Driver and Bonds Expect Unique Fed Move Aug 13, 2021 View in your browser Inflation Lacks Persistent Driver and Bonds Price Unique Fed Move By Blu Putnam, Chief Economist Erik Norland, Senior Economist CME Group Weak Dollar Drove Inflation in the 1970s Inflation has exceeded Fed’s 2% target, yet bond yields barely moved. Ten-year Treasuries are yielding less than 1.3%, below actual inflation rate. Weaker U.S. dollar was a persistent driver of inflation in 1970s. This time around, rising inflation could be due to one-time price shock. Watch video Fed to Hike Rates Before Tapering QE? Fed Funds futures pricing one or more rate hike from mid-2022 to mid-2023. Quantitative easing (QE) continues to keep the pressure on long-term bond yields. Investors in bonds seem to expect rate hike coming before Fed ends QE. Fed ended QE before hiking rates in the last tightening cycle that began in 2013. Watch video SEE MORE ANNOUNCEMENTS
