Discussion Paper

What to Make of Market Measures of Inflation Expectations?

Abstract: Central banks and investors around the world closely monitor developments in financial markets to gauge expectations of future interest rates and inflation. In this post, we argue that two of the most commonly used market-based inflation expectations measures—TIPS breakevens and inflation swaps—are noisy. Although movements in both measures provide policymakers with valuable information, readings should always be interpreted with care.

Keywords: TIPS breakevens; Inflation swaps; inflation expectations;

JEL Classification: E2; G1;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2011-08-15

Number: 20110815