I have been warning about unanchored inflation expectations for a year. Getting ahead of macro dynamics is what gives investors an edge. We are now at a very dangerous place for the Fed as unanchored inflation expectations are a Central Banker’s kryptonite.
Rather than heeding caution, they are running full speed ahead into a tornado.
It is possible it turns out ok? Of course it is, but the odds are not in their favor and it is very risky. Inflation expectations being unanchored is now becoming a consensus talking point, see below WSJ article where it basically says the Fed has discarded their inflation mandate.
This note contains many follow ups to my detailed inflation note The Impulses.
