TLT - Getting A Grip On Inflation Expectations
Inflation expectations have sharply fallen recently, driving down U.S. government bond yields and focusing attention on Fed policy. The market now expects three Fed rate cuts by the end of 2020. The Fed is getting concerned that its current toolkit won't effectively counter a future recession. Hence, it's considering new strategies to boost inflation expectations, with important economic and market implications, in our view.
Chart of the week
U.S. and eurozone market-based inflation expectations, 2010-2019
Sources: BlackRock Investment Institute, with data from Bloomberg, May 2019
Notes: The chart shows the market pricing of inflation based