IMF Working Papers

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

By Peter D. Williams

November 13, 2020

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Peter D. Williams Inflation Expectations in the U.S.: Linking Markets, Households, and Businesses, (USA: International Monetary Fund, 2020) accessed November 21, 2024

Disclaimer: 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.

Summary

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.

Subject: Asset and liability management, Inflation, Inflation targeting, Liquidity, Monetary policy, National accounts, Oil prices, Prices, Return on investment

Keywords: Breakeven inflation series, CPI inflation, Expectations survey, Factor modeling, Global, Inflation, Inflation expectation, Inflation expectations, Inflation risk premium, Inflation targeting, Liquidity, No-arbitrage term structure model, Oil prices, Return on investment, Risk premia, Surveys, TIPS, WP, Yield curve

Publication Details

  • Pages:

    25

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2020/240

  • Stock No:

    WPIEA2020240

  • ISBN:

    9781513561158

  • ISSN:

    1018-5941

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