A Benjamin Cole post
If the Fed were your haberdasher, you would get arrested for indecency—half dressed, so to speak.
The Treasury Inflation Protected Securities market, or the “TIPS market,” is a market-based predictor of inflation. These are bonds sold by the U.S. Treasury that protect investors against inflation, as measured by the consumer price index (CPI).
Right now, institutional investors are buying five-year TIPS that offer a yield of 1.27% more than the yield on regular five-year Treasuries. Ergo, the market says the CPI will run at 1.27% in the next five years.
But the Fed claims its average inflation target (IT) is 2%, and that rate is based on inflation as measured the Personal Consumption Expenditures price index (the “PCE deflator”). However, that index generally runs around 30 to 40 basis points below the CPI.
So, what Wall Street is saying is that inflation in the next five…
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Utopia, you are standing in it! 
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