Financial market outlook for inflation

Michael Bauer and Jens Christensen

FRBSF Economic Letter, 2014

Abstract: Prices of special financial instruments called inflation derivatives can provide valuable insight into investors? views of future inflation. Projections from inflation swap rates suggest inflation will remain low for some time and return only slowly to levels consistent with the Federal Reserve?s notion of price stability. Inflation caps and floors give evidence that investors seem less uncertain about inflation forecasts than in recent years, and that they perceive a favorable inflation outcome as increasingly likely.

Date: 2014
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