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Evidence For Brainard's "Extremely Well Anchored" Infl Expectations


Fed Gov Brainard noted in a post-speech Q&A today that she saw longer-run US inflation expectations as "extremely well anchored" (as quoted by wires).

  • This is arguably a subtle step up in language from Brainard's comments earlier this month where she described expectations as "very well anchored". That quote came on May 11, before the record-breaking April inflation print - 5Y5Y forward inflation closed at 2.54%, vs 2.41% at the time of today's speech.
  • And yet, that change in tone is arguably justified. We note that the latter figure is 24bps below 5Y TIPS-implied breakevens, suggesting even better anchored expectations vs May 11 (when it was 16bps below) - this is the metric St Louis Fed Pres Bullard cited in an interview with MNI last week.
  • While it may be reading too much into it, Brainard's comments further suggest that the Fed is keeping a watchful eye on market-based long run inflation expectations. And they do appear to have become slightly better anchored in the past couple of weeks.

Source: BBG

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