Fed Official: Rising Inflation Expectations Could Be a 'Rate Cut Speed Bump'

On March 26th, the President of the Chicago Fed and an FOMC voter, Gulsbee, issued a warning. He pointed out that there are indications that investors in the U.S. bond market are starting to anticipate higher inflation. This would serve as a "significant warning signal" that could potentially disrupt the rate setters' easing plans. In the week prior to Gulsbee's remarks, a closely monitored University of Michigan survey revealed that U.S. households' long-term inflation expectations reached their highest level since 1993. Gulsbee stated, "If you observe that market-based long-term inflation expectations begin to change, as they have in the past two months, I would regard this as a significant warning signal that requires close attention."