FYI: The Federal Reserve is widely expected to trim interest rates tomorrow, and the prospect of low and possibly lower inflation in the months ahead is a key factor.
The Treasury market’s implied inflation forecast is hinting at the possibility that pricing pressure may be set for a new downturn. The spread on the 5-year nominal and inflation-indexed Notes, for instance, has been inching lower in recent days, suggesting that this barometer of market-based expectations is once again poised to slide.
After stabilizing at around 1.6% earlier this month, the implied 5-year inflation outlook eased in the last two trading sessions to settle at 1.57% on Monday (July 29). It’s unclear if this is noise or the start of a new downturn, but in the wake of softer economic growth in the second quarter the crowd may be inclined to price in a new round of diminished inflation forecasts.
Regards,
Ted
http://www.capitalspectator.com/low-inflation-will-likely-convince-the-fed-to-cut-rates/?utm_source=Daily+AR&utm_campaign=70bb63f0e3-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_c08a59015d-70bb63f0e3-144127017
