A peek at inflation expectations

Excluding short-term (1-year) Inflation expectations, which dances to the tune of oil prices, medium and long-term CPI inflation expectations did not react when the 2% target became official in January 2012. More than one year later, they stabilized at a higher level. Lately, maybe because of all the “time has come to increase rates” talk, they have come down a bit and are still probing to find s new stable, but lower level!

Inflation Exp_415

Note: Since this reflects CPI inflation expectations and the CPI inflation is a few points above the PCE inflation, the CPI “target” is a bit above 2%.

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