Bond Market's Expectation of Inflation: Only 1.75%
After an unusual period in late 2008 resulting in a narrowing spread when the TIPS 10-year yields were unusually high and approaching 3%, and regular Treasury yields were unusually low and approaching 2%, the Treasury market seems to have stabilized, and the bond market's 10-year expectation of inflation is now around 1.75%, lower than the inflationary expectations from 2003-2007 of around 2.5%.
Many analysts and economists seem to be worried about future inflation, resulting from the easy Fed monetary policy in 2008 (which has also contributed to a falling dollar). Apparently the bond market doesn't necessarily share those concerns. According to the inflationary expectations derived from the bond market, future inflation is less of a concern now in 2009 than it was during the 2003-2007 period.