From Friday’s breakeven (5 year Treasury-TIPS):

Figure 1: 5 year Treasury-TIPS spread (blue), DKW expected inflation (tan), both in %. Red dashed line indicates CPI inflation rate consistent with 2% PCE inflation, Light green shading denotes US-Iran conflict. Source: Treasury, Fed DKW.

DKW calculate expected inflation accounting for inflation risk and liquidity risk associated with Treasurys and TIPS respectively.

The 2% PCE inflation target is consistent with 2.4% CPI inflation (over the 1985-2026 period).

A detail:

Figure 2: 5 year Treasury-TIPS spread (blue). Light green shading denotes US-Iran conflict. Source: Treasury.

Kalshi sets 2026 CPI inflation at 3.4% y/y right now, up from 3% on 3/27.