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Oct 24 2014

Markets Pricing in More Fed Rate Hike Delay

While financial markets have settled down following the turbulence of last week, market expectations of inflation and the timing of the Fed rate hike have shifted dramatically. Indeed, since July, inflation expectations for one year and five years from now have dropped sharply, with both falling below the Fed’s 2% target – consistent with the structural “lowflation” that is a natural consequence of the “yo-yo years.”

Furthermore, it was only a few weeks ago that a mid-2015 Fed rate hike appeared to be a foregone conclusion, but concerns about the global economy have the majority of market participants now seeing the Fed Funds Rate unchanged by September 2015.

ECRI’s latest report reviews these issues in detail, providing insight into what this sea change in policy perceptions means for the economy and Fed policy.

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