Updated: 03-19-2018

Hail! Hail! to Michigan
Updated: 16-Mar-18  04:17PM ET
Analyst: Pat O'Hare

Stock prices deflated in the past week, yet market participants learned on Friday that consumers' inflation expectations rose in the month of March.

That was the salient message embedded in the University of Michigan's Preliminary Consumer Sentiment Index for March.

It was revealed in that report that consumer sentiment hit its highest level since April 2004. It was also noted that consumers see the inflation rate in the next year at 2.9%, which is the highest year-ahead inflation expectation since March 2015.

Longer-dated Treasury securities weakened in the wake of that report, which kept inflation expectations alive in the market narrative.

The Federal Reserve, which holds its next FOMC meeting on March 20-21, pays closer attention to the PCE Price Index, which has been running below its 2.0% target for quite some time.

Nevertheless, the Federal Reserve pays attention to consumers' inflation expectations as part of its policy review process. Those expectations are rising, which is something the Treasury market will be paying close attention to as well.

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