Since our last discussion on the issue (see post), more evidence has emerged that inflation in the US has bottomed out. While the treasury markets seem to be completely ignoring this inflection point, core PPI came in materially above expectations today. We know that food prices have been on the rise recently (see Twitter post), but this PPI measure excludes food and energy. Complacency about inflation seems to be rampant - both among fixed income investors as well as at the Fed.
Reuters: - "We think a number of policymakers at the Fed and many market participants are overly complacent on the outlook for inflation," said John Ryding, chief economist at RDQ Economics in New York. "We are not sounding an inflation alarm at this point but ... concerns about deflation or too low of an inflation rate seem quite misplaced at this point."
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