Inflation Expectations Are At 17-Month Highs Ahead Of Today's FOMC Meeting

With the Fed nervous to even let a little MEP ‘Twist’ expire (tightening), we can’t help but be a little nervous of their unbridled and passionate belief that if inflation should rear its ugly (or virtuous, perhaps, in their satanic eyes) head, they will be able to manage and tighten to control it. To wit, we note that one of the Fed’s most-watched indicators of inflation – the 5Y5Y forward inflation breakeven – has just reached its highest level in 17 months and is near its peak since the financial crisis lows in 2009 at over 3.08%. We have six little words for Bernanke, Yellen, et al. “Be Careful What You Wish For.” And by the way, the last few times the 5Y5Y reached these levels marked a short-term top in the S&P 500.

17 month highs in inflation expectations…

These local peaks in inflation expectations have marked local highs in the S&P 500 also…

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.