What to Make of Market Measures of Inflation Expectations?

David Lucca and Ernst Schaumburg

No 20110815, Liberty Street Economics from Federal Reserve Bank of New York

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 (search for similar items in EconPapers)
JEL-codes: E2 G1 (search for similar items in EconPapers)
Date: 2011-08-15
New Economics Papers: this item is included in nep-mac and nep-mon
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