1. Money
Justin Kuepper

Should Inflation Be a Concern for the Fed?

By December 12, 2012

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The U.S. Federal Reserve finds itself in an interesting predicament. Despite growing concern of future inflation among the general public, bond markets seem to suggest that inflation rates will be just 2% over the next five years, according to a recent Bloomberg article.

These predictions were made via the break-even rate for the 5-year Treasury Inflation Protected Securities (TIPS), which should reflect the anticipated rate of inflation in theory. But, some critics argue that bond traders may primarily be interested only in the short-term.

Regardless, the low apparent likelihood of inflation has paved the way for additional financial stimulus in the form of a third round of quantitative easing. For now, it seems the market is convinced that the Federal Reserve will perfectly execute their plans.

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