Market Pessimism Grows Amid Inflation Concerns and Risk-Off Sentiment.
The University of Michigan's survey of inflation expectations over the next 5 to 10 years climbed to 3.2%, much higher than the expected 2.9%, putting further emphasis on the Fed's battle against inflation. The recent rise in consumer inflation expectations shouldn't have happened because gasoline prices have generally been falling. This suggests that market-based inflation expectations will rise again as the market realizes that inflation will be an issue for some time longer, moving the inflation battle into a dangerous spot. If there has been a shift in this psychology, then it will mean that the market will soon pick up on this trend, resulting in higher market-based measures of inflation.
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