US inflation expectations drop to two-month low

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, dropped for the fifth consecutive day to test lowest levels since October 06 by the end of Wednesday North American session, per the data source Reuters. In doing so, the inflation gauge prints a 2.44% level at the latest.

The fall in the inflation expectations could be linked to Fed Chair Jerome Powell’s testimony 2.0. Fed’s Powell reiterated his inflation fears but also said he still believes inflation will come down “meaningfully” in the second half of 2022 during testimony in front of the House Financial Services Committee.

It should be noted, however, that worsening Omicron woes pushed New York Fed President John C. Williams to convey fears of more supply outages and a jump in inflation.

With this, the US 10-year Treasury yields dropped to the lowest since late September as bond buyers attack the 1.40% mark ahead of the key US jobs report for November.

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