Saturday, September 5, 2015

"Given the Apparent Stability of Inflation Expectations"

September 5, 2015
Fed Vice Chair Fischer keeps open possibility of Sept. hike

“Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further”, he said.

Further, given that the moon is apparently made of cheese, there is a good reason to believe that cheese prices will move down over the long-term. So we've also got that going for us, which is nice.

The 5-year forward looking breakeven inflation rate, as seen by comparing the yield of the 5-year treasury without inflation protection to the yield of the 5-year treasury with inflation protection, has fallen to just 1.16% (see chart). Not too stable.

Apparently, there is a big difference between apparent stability and actual stability. Given that there is a big difference, there is apparently no way to know for sure when the Fed will raise interest rates.

But hey, that's apparently always been a given. Fedspeak. Whatcha gonna do? ;)


In monetary policy of the United States, the term Fedspeak (also known as Greenspeak) is what Alan Blinder called "a turgid dialect of English" used by Federal Reserve Board chairmen in making wordy, vague, and ambiguous statements. The strategy, which was used most prominently by Alan Greenspan, was used to prevent financial markets from overreacting to the chairman's remarks.

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