The Fed Communicates All Too Well (Kasriel, Northern Trust): “Following the May 6 FOMC meeting, at which time the Fed made known its displeasure with further declines in the inflation rate, the yield on 10-year Treasury notes began to fall.... I, of course, have a different take on the reason for the recent backup in yields. I believe that the Fed communicated its intents only too well.... Notice that U.S. consumer inflation was considerably lower prior to the inception of the Federal Reserve System in 1914.... If expectations are at all affected by experience, then it would be reasonable to assume, based on the past 88 years of experience, that bond market investors should expect inflation to persist over the next 10 years, especially with the Fed explicitly saying that it will do its best to keep inflation ‘alive.’”
