Scott Sumner and Matt Yglesias comment on the Fed's move. Basically, the Fed has giving more forward guidance that they will not raise rates until the unemployment rate is below 6.5% or the inflation rate is above 2.5%. Scott thinks this is a small move and Matt thinks this is a big move. I just check the market. The TIPS break even spread (the 5 year Treasury minus the 5 year TIPS) is an estimate of future inflation. The spread moved from 2.07% to 2.12%, so five basis points. So I think this is a pretty modest move, but that seems to be outside the range of noise (after an eyeball test).
You can back out the breakeven rate here. Potentially, looking at the five year rate is misleading as this could have been a bigger short term move (say the one year rose 15 bps and the four year forward 1 year rate hardly moved). I honestly don't know how to find those rates, though I hope to spend some time with a Bloomberg terminal and do my best to figure it out some time soon.
You can back out the breakeven rate here. Potentially, looking at the five year rate is misleading as this could have been a bigger short term move (say the one year rose 15 bps and the four year forward 1 year rate hardly moved). I honestly don't know how to find those rates, though I hope to spend some time with a Bloomberg terminal and do my best to figure it out some time soon.
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