Economists are expecting that US consumer inflation will hold steady in tomorrow’s July update while Fed funds futures are pricing in another rate hike at next month Federal Reserve meeting. Yet the implied inflation outlook via 5-year Treasuries bears watching in the days ahead as it suggests that a new round of disinflation could be brewing. If so, the case may be weakening for another dose of monetary tightening.
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Policy sensitive 2 year Treasury yield, at 2.68%, holds near 10-year high: