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As should continued declines in expected inflation:Long-term inflation expectations dipped again from July to August.
So let us all praise expected inflation.
"Real" yields are, strictly, nominal yields less expected inflation.
INFLATION EXPECTATIONS: When expected inflation is high, workers demand larger wage increases.
They expected inflation in 1999 to be 3.4%; it's now about 2%.
Real government spending will be reduced by higher than expected inflation.
Similarly, a fall in expected inflation raises the "real" or inflation-adjusted interest rate.
They pointed out that expected inflation automatically raises market interest rates.
Expected inflation (as implied by the gap between conventional and inflation-indexed bond yields) has risen.
Expected inflation looks tame, too (see chart).The hawks, by contrast, see the world quite differently.
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#gfc2 November 13 , 2012Michael Hewson (@michaelhewson) Inflation much higher than expected - Inflation report tomorrow should be an interesting read.
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