Yet more confirmation that inflation is going to significantly overshoot. The next question is what's already priced into Treasuries. Breakevens are priced off CPI expectations and the 1yr rate is 2.8%. So if we hit 5% as this chart suggests, my guess is that isn't priced.
It's laudable that the Fed is trying to address inequality and racism. But the policy not rising "rates pre-emptively to head off inflation as unemployment falls" has market consequences. https://www.bloomberg.com/news/articles/2021-04-13/fed-is-taking-on-a-racist-legacy-in-the-field-of-economics?sref=6xT17mat
The current macro backdrop looks more & more like the late 1960s… While policymakers believe #inflation is contained, the #markets are rightly worried. This is beginning to show in the correlation between #bond & #equity prices… #economy #economics