Kevin Warsh’s vow to rein in inflation has bolstered the new Federal Reserve chair’s credibility in financial markets, big fund managers say, helping to drive down investors’ expectations for long-term price rises.
Ten-year break-evens, which reflect the bond market’s view of long-run inflation, have dropped from above 2.5 per cent in mid-May to about 2.2 per cent this week, their lowest level in more than a year.
Investors say the shift reflects both the recent fall in oil prices to levels last seen before the start of the US-Iran war and the Fed’s hawkish turn at its meeting last week, where Warsh called “persistently high prices” a “burden for the American people”.
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