Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Color us stunned. While the world and their pet cat Roger are not worrying about inflation because Bernanke says CPI/PPI are still well-anchored and everything else is "transitory"; it turns out the market has a 'different' opinion.
We have discussed inflation expectations before (whether 5Y forward views or 10Y inflation swap breakevens) as a trigger for Fed action (or inaction) but this time, the market front-ran Bernanke's Bazooka and in the last two days of QEternity has exploded higher with 5Y forward expectations now near 6 year highs. CPI remains below 2% but there is a clear lag between the rise in market-implied inflation and it showing up in the unicorn-laden CPI prints – what this means is that given the hubris of the Fed yesterday, market expectations of inflation are inferring CPI could rise to over 5% within the next 3 to 6 months.
It will surely be difficult for Ben to keep-on-buying ('Finding Nemo'-like) in the face of that kind of 'transitory' rise in real data – though for now, real money remains bid as risk comes off a little (even as the long-bond yield blows 26bps higher this week) – oh and CPI and PPI jump their most in 3 years.
CPI vs inflation break-evens and forward expectations…
And longer-term – this has not ended well as once it runs, it is hard to stop…
