Very good insight here from Sober Look – inflation expectations are falling fast again:
“The 5-year real rates in the US have recently turned positive, which some would suggest represents tighter monetary conditions. With real rates on the rise, the Fed will have a great deal of room to “slowroll” the rate hikes. If inflation expectations fall further, we may see a more dovish stance from the FOMC. “
Yes, that means one thing – if you’re betting on tighter Fed policy any time soon then this doesn’t bolster your case. We’re seeing low inflation around the globe, continued economic weakness and with inflation expectations falling even further it means that global central banks have more breathing room to continue with their accommodative policy.
I continue to see lots of commentators talking about how “tapering is tightening” or how the Fed is likely to tighten in early 2015. This indicator makes that a very unlikely scenario unless things change quickly and dramatically….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.