Philadelphia Fed President Charles Plosser
is giving a speech
before the New Jersey Bankers Association this morning. His general theme: That the yield curve will remain flat for some time because inflation and inflation expectations should be "lower and more stable" in the future. He also says some of the risk premium has come out of long-term bonds due to the "Great Moderation" in the volatility of economic growth and inflation over the past 20 years.
However, I find this speech just a bit ironic given that literally yesterday, long-term bonds got pasted and the yield curve reached its most UN-inverted state in several months. Are bonds questioning the Fed's inflation-fighting credibility for the first time in a long time? That's what it looks like.