Inflation Expectations in the U.S.: Linking Markets, Households, and Businesses

Peter Williams

No 2020/240, IMF Working Papers from International Monetary Fund

Abstract: Inflation has been below the Federal Reserve’s target for much of the past 20 years, creating worries that inflation may be deanchoring from the FOMC’s target. This paper uses a factor model that incorporates information from professional forecasters, household and business surveys, and the market for Treasury inflation protected securities (TIPS) to estimate long-run inflation expectations. These have fallen notably in the past few years (to roughly 1.9 percent for CPI inflation, well below the FOMC’s target). It appears that, even before the covid recession, the private sector viewed the economy as likely to suffer from persistent headwinds to inflation.

Keywords: inflation expectations; yield curve; factor modeling; no-arbitrage term structure model; TIPS; surveys; WP; inflation expectation; inflation risk premium; breakeven inflation series; CPI inflation; risk premia; Inflation; expectations survey; Return on investment; Oil prices; Liquidity; Inflation targeting; Global (search for similar items in EconPapers)
Pages: 25
Date: 2020-11-13
New Economics Papers: this item is included in nep-mac, nep-mon and nep-ore
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