Interest rates on government bonds have already risen significantly, he said, which is no surprise given the sharp expansion of government debt. "Accordingly, both interest rate and inflation expectations in the financial markets have risen significantly since the beginning of the year," Wieland said. He added that this is now reflected in inflation data. Year-on-year, the consumer price index was already at 2.6% in March. The core rate of the consumer deflator, which the Fed is looking at in particular, was already at 1.8% in March. "But, after all, the Fed has already announced as part of its new strategy that it wants inflation to overshoot two percent for some time. So it's not going to hit the brakes for now."
As for the success of the new Fed strategy, however, Wieland is skeptical. "Certainly the Fed is taking greater risks than in the past. Its policy of setting short-term money rates will lag rather than run ahead of longer-term market and bond rates."
Süddeutsche Zeitung: "Die Zinsangst geht um" (€)