5yr Tips 5yr Forward
The Fed watches this carefully in regard to inflation expectations, along with surveys and professional forecasts which have gone up considerably.
The 5 year tips 5 years forward dipped a couple of months ago on the generally commodity sell off, then fell again for short term technical reasons- the first five years went up with crude and the 10 year stayed about the same, so the forwards went down as a matter of arithmetic and little volume – and now this is all sorting itself out along the curve, with the forwards moving up as shown.
Just saw Fed Gov Warsh on TV saying the same thing Vice Chair Kohn said (and was also in the Fed minutes) they have to be careful about perceptions that the Fed’s inflation tolerance have gone up feeding into inflation expectations.
And concern has been further supported by pronouncements that even if the economy weakens some there’s no room for rate cuts.