Introduction
Even though market measures of inflation expectations such as the 5Y5Y inflation swap have been dropping in recent months, suggesting that the US is experiencing a disinflationary phase and pushing the Fed to act as soon as possible, leading indicators are still showing that the pressure on core inflation remains firm for the next 12 to 24 months to come. For instance, figure 1 shows that the NY Fed's underlying inflation gauge ((UIG)) measure and the NFIB surveys are pricing in a higher core inflation within the next 12 to 16 months.
Figure 1