The Increase in Inflation Compensation: What’s Up?
Abstract: Supply and demand imbalances associated with the COVID-19 pandemic have contributed to a sharp increase in price inflation since early 2021. In response, market-based measures of short-term inflation compensation have risen sharply in the United States. Survey-based measures suggest that this has not affected longer-term inflation expectations. However, analyzing the difference between market prices of standard and inflation-indexed government bonds provides tentative indications that investors have raised their 10-year inflation expectations since spring 2021 to levels above their historical range.
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Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2022-07-05