Dirty word or not, the market braces for ‘inflation’ and any Fed warnings that it is heating up
by Ellie Ismailidou
Five. Count em—five. Five different Federal Reserve officials in recent days pointed to rising inflation expectations as a potential economic drag well before actual inflation takes hold. The frequency of its mention leaves inflation the buzzword that could cause a Fed-induced market selloff when Janet Yellen takes the microphone in New York on Tuesday.
In only one day, the market-implied probability of an April interest-rate hike doubled, after St. Louis Fed President James Bullard said last Wednesday that inflation would overshoot the Fed’s 2% target. Other officials echoed his sentiment, sparking some Wall Street jitters that an aggressive Fed could move too fast for the comfort of growth-focused American corporations or that a Fed in catch-up mode had actually waited too long to take back aggressive accommodation.