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Are You Worried about Inflation? - Real Time Insight

Treasury inflation protected securities (TIPS)-that are designed to protect against rising inflation--have been big winners this year. Barclays US TIPS index has returned 4.9% year-to-date.

The yield on the 10-year TIPS is now the lowest in a year and the spread between 10-year TIPS and the regular Treasury notes has been rising in recent months. Further, a recent auction for TIPS saw its biggest demand in 2 years.

While inflation has remained much below Fed's target of 2% there are signs that inflation expectations have started rising.

The personal consumption expenditures price index-one of the Fed's preferred measures of inflation--was up by 1.6% in April from a year ago. It was the highest level for the index since November 2012.

The data from the Federal Reserve Bank of Cleveland shows a modest rise in inflation expectations in recent months.

While FOMC members project inflation to reach about 1.5% by the end of this year and between 1.5% and 2% in 2015, many economists now believe that the headline number may exceed the Fed's target later this year.

Are investors getting worried about inflation? Join the conversation below.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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