Inflation expectations are picking up again, as a rebound in oil prices helps ease an early-year deflation scare. Measures tracked by the Federal Reserve and the European Central Bank have risen to the highest levels since December. The five-year forward five-year break-even rate in the U.S., which measures annual inflation currently expected by investors between 2020 and 2025, was 2.034% on April 29, the latest data available from Crédit Agricole.
The development is a good sign for investors who are betting that interest rates and the economy are on a normalization path seven years after the financial crisis. Low inflation has complicated the Fed’s plan to raise interest rates for the first time since 2006. Fed officials last week said they need to see more jobs created and inflation nearer their 2% target before they consider lifting benchmark borrowing costs from near zero.
“At the margin, this will certainly be welcome news at the Fed and is a precursor to raising rates,’’ said Collamore Crocker, managing director of global inflation markets at Mesirow Financial. “It is not the only factor, however, and with other recent economic data softening, we hold to our view that a [rate increase] before September remains very unlikely.”
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Bitcoin price extends retreat from $69K as old whales shift their holdings to new whales
Bitcoin price continues to move further away from the $69,000 threshold, gaining ground as BTC bulls hope for a retest of the $73,777 peak. This is because of the general assumption that clearing this blockade would set the tone for a reach higher, marking a new all-time high.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.