Is the fed failing to re-anchor expectations? An analysis of jumps in inflation swaps

Messaoud Chibane and Ano Kuhanathan

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: We investigate US inflation expectations de-anchoring by analyzing tail behavior of inflation swaps. We extract probabilities of jumps in inflation expectations along with their potential jump severity and look through an event study approach and a regression analysis on how Fed policy impacted these. Our findings suggest that recent increases in interest rates and FOMC announcements of hikes did not manage to re-anchor short term inflation expectations as both probabilities and intensity of potential inflation boom/crash anticipations remain broadly independent of announcements and short-term interest rates dynamics.

Keywords: Inflation expectations; De-anchoring; Monetary policy; Inflation swaps; Federal reserve (search for similar items in EconPapers)
JEL-codes: E31 E58 G12 G13 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003768

DOI: 10.1016/j.frl.2023.104004

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