A High Five for Team The-Fed-Has-Got-This

A draft of a column for Project Syndicate

As of the start of February 2022, the five-year five-year forward CPI inflation breakeven rate in the bond market was hanging at 2% per year—a number corresponding to a PC each chain inflation forecast from 5 to 10 years hence of some 1.6% per year, materially below the Federal Reserve’s 2% target. Thus as of the start of February, I was feeling very good about being on Team Transitory as far as inflation was concerned—or at least on Team The-Fed-Has-Got-This, and Team The-Inflation-Expectations-Anchor-Is-Solid.