Forward Guidance

Inflation Expectations Are Already Unanchored | Weekly Roundup

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Apr 25, 2025
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INSIGHT

Understanding the Doom Loop

  • The "doom loop" describes cyclical dynamics where dollar weakness increases inflation and raises asset risk premiums.
  • Policy responses like rate cuts may worsen the loop by weakening the dollar and boosting inflation.
INSIGHT

Inflation Expectations Unanchored

  • Inflation expectations are unanchored, indicated by rising mean expectations despite stable medians.
  • Actual buyer behavior, like increased spending due to anticipated price rises, confirms this unanchoring.
INSIGHT

Fed Lacks Plan for High Inflation

  • The Fed has no clear plan to tackle persistent 5-6% inflation if it occurs.
  • Being on hold at current higher rates likely won't bring inflation to target.
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