Torsten Slok, chief economist at Apollo, says markets are pricing that inflation expectations "have almost become unanchored already," and warns about the message seen in a move higher in ISM Services paid data over the last several months.

New York

An economist has noted that recent inventory reductions have shifted pricing dynamics, with companies now setting prices based on new costs, including tariffs. This has contributed to concerns about inflation, particularly as service sector prices have shown a strong upward trend in recent data. Labor shortages, partly due to deportations, are also putting upward pressure on wages, especially in sectors reliant on undocumented workers.

Market-based measures indicate that inflation is expected to remain above the central bank's target over the next year. The economist observed that recent treasury auctions reflected these concerns, with rates potentially rising further due to ongoing fiscal and treasury issuance. These factors have led to increased volatility and uncertainty in market inflation expectations.

Economist: Markets looking 'wobbly' on inflation expectations

Let's sit on the data we get later this morning at 8.30 Eastern Time. To what extent do you believe that inventory management has delayed some of the pass-through? And how many more months do we need to see of data before you get comfortable that we've seen the limits of this? That's exactly right. That's why the census data for the inventory-to-sales ratio. First, companies were building inventory as, of course, we saw your tariffs come in, and those inventories have now been running down, especially for retailers. And now those inventories are down now to a more normal level. So now we are getting into a situation where companies are pricing goods not so much on whatever is left in the inventory, because there's not much left in the inventory. It really is the new price that includes tariffs. And that's likely why the number this morning, what is most important, is not only what's happening on the goods side, where most of the worries are about inflation, but the fact that ISM prices paid for services also showed a very strong uptrend in the latest data. It's telling you that for a long time, the story was, oh, it's all about goods. Services is fine. But the fact that ISM services paid for the last several months have started to move higher is telling you that there is a bigger risk, in particular also with deportations at the same time, removing labor from the economy. That means more upside pressure on wages, especially in the sectors where undocumented immigrants are working. That all means that service sector inflation could also be a very important part of the number that comes out here at 8.30. Are you seeing this show up in inflation expectations? Survey-based inflation expectations of consumers can be very volatile. What are you seeing in markets? Well, so the one-year head swap, meaning what does the market price, and this is people putting real money, betting on what will headline CPI be in 12 months' time, is currently pricing that inflation at this time next year in 12 months' time will be 3.3. That's significantly higher than the Fed's 2% target. So that's also telling you that the market is pricing that inflation expectations have almost become unanchored already. Is that because people think that inflation will be higher on its own, or is it because the expectation now is that the Fed will be cutting, and therefore there'll be even more impulse to inflation, not only from tariffs and not only from the dollar depreciation, but also from potentially the cut that's coming from Fed prematurely? What do you think it is? I still think the risk is that the market is beginning in the long end to look a little bit more wobbly when it comes to inflation expectations. Markets are, broadly speaking, especially when you take last week's auctions for treasuries, there was a number of issues with three-year, 10-year auctions last week where you begin to worry about, well, if we now have on top of the fears that inflation might be moving higher, then rates in particular in the long end could also be moving higher, simply because of the significant fiscal issuance and treasury issuance still in the pipeline.

The National Guard has started to patrol the streets of Washington after U.S. President Donald Trump declared a crime emergency. He’s also ordered troops to clear out all homeless encampments by the end of the week.

Washington

National Guard starts patrolling Washington

Record-high temperatures across Europe are fanning wildfires across the continent. Experts say a warming climate and an increase in flammable vegetation from rural depopulation are major factors.

Madrid

Historic heat fuels fires across Europe

Hungary's PM Viktor Orbán said the EU attempts to set conditions for a meeting to which leaders of the EU were not invited. He also called for an EU-Russia summit.

Brussels

Ukraine Invasion

EU leaders rally behind Ukraine ahead of Trump-Putin talks

President Trump said Monday he expects that Russia and Ukraine will "land swap" certain territories as part of an eventual ceasefire deal. Mr. Trump is set to meet with Russian President Vladimir Putin in Alaska on Friday.

Trump claims 'land swapping' between Russia, Ukraine will happen

Taylor Swift confirmed her 12th studio album, "The Life of a Showgirl," in a teaser for her upcoming appearance on her boyfriend Travis Kelce's podcast. Swift did not disclose the release date of the album.

Taylor Swift announces new album, 'The Life of a Showgirl'

U.S. President Donald Trump said that his planned meeting with Russian President Vladimir Putin in Alaska on Friday will be to "feel out" the leader as pressure mounts for Russia and Ukraine to make a peace deal.

Trump to meet with Putin in Alaska on Friday

A meeting between US President Donald Trump and Russian President Vladimir Putin is set to take place in Alaska, with European leaders notably excluded from the talks. Until Europe can defend itself, it's not likely to be invited to a great power dialogue, experts have told Euronews.

Alaska

Europe frozen out as U.S. and Russia prepare for Alaska talks

U.S. President Donald Trump said on Monday that Kyiv and Moscow will both have to cede land to end the war in Ukraine and talks with Russian President Vladimir Putin this week will instantly show whether the Kremlin leader is willing to make a deal.

Trump says both sides in Ukraine war will need to cede territory

A prominent Al Jazeera journalist, who had previously been threatened by Israel, was killed along with four colleagues and another journalist in an Israeli airstrike in an attack condemned by journalists and rights groups.

Jerusalem

Middle East Conflict

Israeli strike kills Al Jazeera journalists in Gaza

At last one person is dead, dozens are injured and two people are unaccounted for after an explosion at the U.S. Steel Clairton plant in Pennsylvania on Monday.

Clairton

At least 1 dead, dozens injured in U.S. Steel plant explosion

President Donald Trump has placed the Metropolitan Police Department under federal control and announced he's activating the National Guard to combat crime in Washington, D.C.

Trump deploying National Guard to Washington, D.C.

Ukrainian President Volodymyr Zelenskyy is thanking European leaders for backing his push to join this week's Trump-Putin summit in Alaska, insisting an end to the war must be fair.

Trump and Putin set to meet on Friday without Zelenskyy

U.S. President Donald Trump and Russian President Vladimir Putin are scheduled to meet in Alaska on Friday to discuss ending the war in Ukraine. Kyiv and its allies fear being sidelined and worry any deal could reward Moscow’s occupation of Ukrainian territory.

Kyiv

Ukraine fights for a seat at the table ahead of Trump-Putin summit

Israeli Prime Minister Benjamin Netanyahu is defending his decision to keep fighting in Gaza, despite protests at home and abroad. Debora Patta has the latest.

Tel Aviv-Yafo

Netanyahu defends plan to expand war in Gaza

Ukrainian President Volodymyr Zelenskyy is thanking European leaders for backing his push to join this week's Trump-Putin summit in Alaska, insisting an end to the war must be fair. Willie James Inman has more from the White House.

Anchorage

Countdown begins to Trump-Putin meeting, without Zelenskyy

Violent weather hit several Midwest states over the weekend, with high winds being blamed for the death of at least one person in Nebraska and flash flooding prompting a state of emergency in Milwaukee County, Wisconsin.

Milwaukee

Milwaukee inundated with floodwaters, one dead in Nebraska

Thirty-seven major wildfires are currently burning across nine states in the western United States. Firefighters have made significant progress on the Canyon Fire in California, achieving 62% containment and allowing over 4,000 residents to return home, with minimal property loss reported.

Major fires continue to burn across western U.S.

President Donald Trump's envoy met with the Qatari prime minister on Saturday in Spain to discuss possible deals to end the Israel-Hamas war in Gaza, as Israel's military plans to expand into Gaza City. Meanwhile, families of Israeli hostages and Palestinians alike are pleading for peace.

Families of Israeli hostages, Palestinians plead for ceasefire

Renewed anti-government protests have taken place in Israel, where relatives and supporters of Israeli hostages held by Hamas demanded their release and an end to the brutal war Israel has been waging in Gaza.

Israeli anti-government protesters take to the streets in Tel Aviv

Ukraine's President Volodymyr Zelenskiy said that Kyiv "values and fully supports" a joint statement by European leaders that welcomed U.S. President Donald Trump's efforts to try to end the war, while emphasizing the need to pressure Russia and provide security guarantees for Kyiv.

Europe stresses need to protect Ukraine ahead of Trump-Putin meet

Ukrainian President Zelenskyy has firmly rejected Russia’s proposal requiring land concessions to end the war. Ukrainian and European officials have submitted a counterproposal to Washington.

Ukraine, Europe counter Russian ceasefire proposal ahead of US talks

There have been more protests, and counter protests, in several British towns and cities, outside of hotels used to accommodate asylum seekers. Some far-right protesters called for one of the hotels to stop housing migrants.

Bournemouth

UK: Anti-immigration & anti-racism protesters face off

A man who opened fire on the U.S. Centers for Disease Control and Prevention headquarters in Atlanta, firing into the complex from a pharmacy and killing a police officer, blamed the COVID-19 vaccine for making him depressed and suicidal, according to reports.

Atlanta

Vaccine conspiracy could be behind Atlanta shooting

The Gifford Fire burning through the rugged backcountry of California's Central Coast is now the state's largest wildfire of the year. It has reached so-called "mega-fire" status and is one of 38 large fires burning across nine states.

San Luis Obispo

Largest California wildfire of 2025 reaches "mega fire" status

President Trump is preparing to take another swing at a deal with President Putin during a high-stakes summit next Friday in Anchorage, Alaska. Ukraine President Volodymyr Zelenskyy says the country will never give up land, even if it means an end to the war.

Trump: Ukraine must cede land for ceasefire; Zelenskyy refuses

The United Nations Security Council is set to hold a rare Sunday meeting to discuss Israel's plan to intensify its 22-month war with Hamas by taking control of Gaza City. CBS News' Debora Patta reports on the conflict and the mounting humanitarian crisis.

Netanyahu's plan to occupy Gaza comes under fire

At least 200 protesters have been arrested at a rally showing solidarity for Palestinians in Gaza, outside the Parliament in London. Crowds are also demonstrating against a ban on the Palestine Action group, after it was designated as a terrorist organisation.

Breakdown