Here is what the bond market currently predicts:
Sept 2015 - Fed tightens to 1/2%
March 2016 - 1%
Feb 2017 - 2%
Sep-2018 - 3%
mid-2022 - 4%
capecod over on M* points out that it's extremely likely that we have a recession before for 2022, so chances are the rates will drop again before rising to that 4% value.
In 2019, the 5yr Treasury is expected to yield 3.5% (currently 1.48%).
Inflation expectations over the next:
5 yrs: 1.98%
10 yrs: 2.19%
30 yrs: 2.32%
this is all courtesy of
UPDATE: Market-Based Rate Predictions
So we are probably talking an incredibly gradual Fed tightening cycle, almost 2 years to get to a Fed funds rate of 2%. And what we have seen so far is that as the Fed becomes less accommodative, long term interest rates continue to drop. Why? Well, less help for the economy tends to slow the economy, reducing the expectations of high interest rates in the future.
Personally, I doubt we see serious inflationary pressures until 2017, when the unemployment rate might start dropping suddenly due to worker shortages. Yes - you heard that right, worker shortages due to demographics. This may create wage pressures, and wage pressures do tend to fuel inflation.
In the meantime, the slowing global economy and still highish unemployment rate act to dampen inflationary pressures.
Even though food and fuel prices increases hit people in their pocket book, they don't create inflationary pressures on an economy. Rather, they act like a drag or a tax, limiting the funds that can be spent on other items. They tend to slow the economy rather than goose it.
Just my perspective.
Audrey