GlossaryInflation Forecast
Inflation Forecast
Compares actual US inflation with the inflation the bond market is pricing in for the next ten years. A moving average of this market expectation serves as the forecast line: if it is below the current inflation rate, the market expects inflation to fall.
How to read it
- Forecast below the actual rate: The market expects inflation to fall. That opens room for rate cuts and is seen as positive for risk assets.
- Forecast above the actual rate: The market expects rising inflation.
- Caution during inflation spikes: The breakeven rate is a ten-year average and moves sluggishly around 2 to 2.5%, even when actual inflation is at 9% as in 2022. In such phases the forecast sits below it almost automatically. More telling is whether the market expectation itself is moving up or down.
Good to know
- The CPI comes out monthly, around the middle of the following month. The latest month is therefore often missing at the right edge.
- Besides inflation expectations, the breakeven rate also includes risk and liquidity premiums. In crises such as 2008 and 2020, it fell further than expectations alone can explain.
- No settings other than the style. Intended for 1D to 1W.