Tuesday, July 20, 2010

The Expected Inflation Curve

As a follow up to my recent post on the Cleveland Fed's update on its expected inflation series, I have graphed below the expected inflation curve.  This curve plots the average expected inflation rate at various yearly horizons using the Cleveland Fed data. This figure makes clear that inflation expectations are headed down across all horizons. (Click on figure to enlarge):


  1. If the prices of real estate and equities are falling.... and the cost of living in terms of food,fuel, and many other real costs of living are rising, those things do not unfortunately, cancel each other out.

    We are living in a time of asset deflation accompanied by cost-push inflation.

    Not a prosperous condition for families. It's the worst of all worlds. All the negatives of inflation but none of the positives.

  2. Congratulations! You got it right. We are now undoing the period where we had high inflation in housing while holding inflation low with food, rent and transportation.