Creating a History of U.S. Inflation Expectations

Abstract

Central bankers closely monitor inflation expectations because they’re an important determinant of actual inflation. Treasury inflation-protected securities (TIPS) are commonly used to measure bond market inflation expectations. Unfortunately, they were only introduced in 1997, so historical data are limited. We propose a solution to this problem by using the relationship between TIPS yields and other data with a longer history to construct synthetic TIPS rates going back to 1971.

Citation

Groen, J. J. J. and M. Middeldorp (2013), “Creating a History of U.S. Inflation Expectations” Liberty Street Economics, August 21 2013, Federal Reserve Bank of New York.