MBS Day Ahead: Does Inflation Still Matter?

By Matthew Graham

Posted To: MBS Commentary

Today’s Consumer Price Index was one of the week’s only ” important ” pieces of economic data. Or perhaps we should say it was one of the week’s only ‘big-ticket’ reports in the sense that it has been one of the bigger market movers among most of its peers in the long run. Does it still deserve its big-ticket status? It depends whom you ask, and perhaps WHEN you ask. The farther back into the past one goes, the more interesting inflation becomes. But since the late 90’s, the economy and the Fed’s monetary policy framework increasingly seem to be honing in on the 2% goal fairly reliably. Does it matter that inflation is running above 2%? If 2% is the target and we’re at 2.2% currently, isn’t that bad for bonds? No and no. The Fed has talked repeatedly…(read more)

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