Where as there is no disputing the inflation is raging, we could very much prolong it if we continue to expect more of it.
Both regular people and Wall Street sophisticates are ratcheting up expectations for inflation, in what wonks worry could be the start of a self-fulfilling prophecy, Matt writes.
Driving the news: A market-based reading of inflation expectations — often referred to as a five-year breakeven — shot to the highest level on record this week.
- This number is derived by comparing the yields on Treasury bonds to a separate Treasury that’s protected against losses from inflation.
- At its current level of 3.5 percentage points, it suggests that investors now expect inflation to average roughly 3.5% a year for the next five years.