Good inflation news from the bond market

J. Bradford DeLong  |  University of California, Berkeley  |  11 May 2022  

As of Friday 6 May, the bond market expected US consumer price inflation to average 2.5% between five and 10 years from now. That is the rate of inflation needed to equalise returns on inflation-indexed and non-indexed US Treasury securities. And given that CPI inflation has been running higher than the rate associated with the implicit price deflator for personal consumption expenditures, I count that 2.5% five-year, five-year-forward rate as hitting the US Federal Reserve’s 2% price-deflator inflation target.

What, then, would it take to get the economy back to the ...

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