Thursday, September 25, 2014

Inflation, etc.

It looks like I'm not the only one who has started worrying a bit more about tight monetary policy.

Expected 5 year inflation has dropped by nearly 0.5% since June - about 1/3 of that drop coming in the last few days.  Inflation expectations are back down to the post-QE2 lows.

Meanwhile, the National Association of Realtors notes that existing home sales disappointed last month, due in part to a drop in all-cash and investment buyers.

Home prices continue to moderate.  However, new home sales were strong in August. And household formation, which had dipped last year, appears to be starting to grow again.


  1. Expect inflation---PCE---well under 2 percent going forward....commodities dead, unit labor costs dead...and if housing flattens?

  2. TravisV here.

    Highest-quality analysis ever posted at Zero Hedge?

    "Treasury Curve Roundtrips To Flattest Since S&P’s “666″ Intraday Lows”

    1. Lower near-term inflation expectations and lower long term nominal yields certainly doesn't seem like good news.

      It's odd, though, that TIPS bonds in late 2007 didn't signal any deflationary fears, even though the bond market already seemed to be craving looser monetary policy. Of course, as I pointed out in today's post, when the bottom dropped out of inflation expectations, finally, in September 2008, the FOMC thought that was great news!