Inflation Expectations vs. Fed Inflation Target: Now Not That Far Off (If It Ever Was)

The Fed’s inflation target is 2% on PCE inflation. CPI inflation has averaged 0.5 ppts above PCE inflation since 1967. Putting these two points together, we see that expected inflation over the next five years is pretty close to target (h/t Mark Zandi). Figure 1:¬†Five year inflation breakeven calculated as five year Treasury yield minus … Continue reading Inflation Expectations vs. Fed Inflation Target: Now Not That Far Off (If It Ever Was)