US 10-year inflation expectations retreat towards monthly low

US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, begin the week on a negative note while declining to 2.44% at the latest. In doing so, the inflation precursor snapped two-day inaction by adding to the market’s cautious mood ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting minutes.

With this, the inflation expectations join the league of recently downbeat Consumer Price Index (CPI) and the Producers Price Index (PPI) from the US to challenge the hawkish Fed bets. However, officials from the US Federal Reserve (Fed) defend the US central bank’s aggressive rate hikes while wanting to wait for sustained easy inflation numbers for any change in the outlook.

As a result, the market sentiment remains divided even as the Wall Street benchmarks post mild gains and the US 10-year Treasury yields ease.

That said, this week’s Fed Minutes will be crucial for near-term directions amid uncertainty over the policymakers’ bias after the latest inflation readings and the size of the next rate hike.

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