Rising breakeven inflation rates could cause Fed to consider no action in November: strategist

Market participants’ expectations for future inflation, as measured by break-even rates, could rise enough for the Federal Open Market Committee to consider keeping interest rates unchanged next month, according to Thierry Wizman, global currency strategist. and Macquarie fees. .

The 10-year breakeven rate rose to 2.27% on Wednesday, based on the most recent data available from the Federal Reserve Bank of St. unemployment benefits, both pointing to a US economy that remains strong.

Referring to the possible outcome of next month’s presidential election between Vice President Kamala Harris and former President Donald Trump, Wizman said, “we think if the break-even point gets to 2.50% – presumably, they could go up if Trump wins – then the FOMC would contemplate ‘cancelling’ the November rate cut. What happens on November 5th is critical to what happens on November 7th,” being the latest date when the Federal Reserve releases its next update. of politics.

Five- or 10-year breakeven rates above 2.5% have previously been identified by others as the level at which market participants would begin to signal increasing concern about a more sustained upside risk to inflation.