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Inflation Expectations in the U.S.: Linking Markets, Households, and Businesses
Author: Peter D. Williams
Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 240
Language:
English
Publication Date:
13 Nov 2020
DOI:
https://doi.org/10.5089/9781513561158.001
ISBN:
9781513561158
ISSN:
1018-5941
Pages:
25
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
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund