Signs that investors in the US bond market are baking in higher inflation would be a “major red flag” that could upend rate-setters’ plans to cut interest rates, a top Federal Reserve official warned.
The remarks from Austan Goolsbee, president of the Chicago Fed and a voting member of the Federal Open Market Committee, come just over a week after a closely watched University of Michigan poll showed households’ long-term inflation projections hit the highest level since 1993.
“If you start seeing market-based long-run inflation expectations start behaving the way these surveys have done in the last two months, I would view that as a major red flag area of concern,” Goolsbee told the Financial Times.