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Q4 experiences small increase in expected inflation

The difference in interest rates between the 10-year Treasury Note and the 10-year Treasury Inflation-Protection Securities, or TIPS, is one way of measuring the market’s expectation for inflation. TIPS are a type of Treasury security that is indexed to inflation to prevent loss of the real value of the security due to inflation. The graph shows that the market expects inflation to average 2.01 percent in the next 10 years. The TIPS spread increased 11 basis points since the end of the third quarter.

Source: Federal Reserve

Compiled by: Jenny Ross

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