Must-Read: Ben Eisen: Newest Inflation Expectations Likely to Trouble the Fed

Must-Read: Ben Eisen: Newest Inflation Expectations Likely to Trouble the Fed: “The Federal Reserve probably won’t like the latest data out of the University of Michigan on Friday…

…inflation expectations over the next five to ten years dropping to 2.3% in June, a record low…. That’s on top of market-based inflation expectations that have also fallen over the past month…. When Federal Reserve Chairwoman Janet Yellen spoke on Monday, she drew attention to inflation expectations as a key input in actual inflation. She said:

It is unclear whether these indicators point to a true decline in those inflation expectations that are relevant for price setting; for example, the financial market measures may reflect changing attitudes toward inflation risk more than actual inflation expectations. But the indicators have moved enough to get my close attention. If inflation expectations really are moving lower, that could call into question whether inflation will move back to 2 percent as quickly as I expect….

The market is taking note as well. Benchmark 10-year Treasury note yields dropped to their lowest of the day after the data and recently traded at 1.63%, a new low for the year on a closing basis…