Saturday, January 21, 2012

Cleveland Federal Reserve: Ten-Year Expected Inflation is Only 1.39%, the Lowest in 30 Years


"The Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is 1.39 percent. In other words, the public currently expects the inflation rate to be less than 2 percent on average over the next decade (see chart above).

The Cleveland Fed’s estimate of inflation expectations is based on a model that combines information from a number of sources to address the shortcomings of other, commonly used measures, such as the "break-even" rate derived from Treasury inflation protected securities (TIPS) or survey-based estimates. The Cleveland Fed model can produce estimates for many time horizons, and it isolates not only inflation expectations, but several other interesting variables, such as the real interest rate and the inflation risk premium."

MP: Inflation expectations are currently close to the lowest level in at least 30 years (see chart above).

HT: Benjamin Cole 

8 Comments:

At 1/21/2012 3:07 AM, Blogger PeakTrader said...

It could mean a "Lost Decade" instead of the continuation of strong disinflationary growth, from 1982-07 (which included only one moderate and one mild recession).

 
At 1/21/2012 3:21 AM, Blogger PeakTrader said...

This economic recovery may be the weakest in U.S. history, even with the massive government "stimulus."

So far, it's been a rolling depression, with a few months of improvement, a few months of deterioration, etc.

Even if a virtuous cycle of consumption-employment takes hold in 2012, there's been enormous economic damage over the past four years.

And if the cycle of recovery doesn't take hold, or takes hold slowly, the damage will accumulate (and perhaps accelerate).

 
At 1/21/2012 7:07 AM, Blogger Larry G said...

Peak might be right - but many of the economic indicators seem up and going up at a healthy rate while things like unemployment fester.

but in terms of what the Fed predicts.. is this the same Fed that back in 2006 said the housing situation was not likely to affect the economy?

I notice there are several different Fed Reserves in various cities.

Do each of them have their own "reputation" (track record) in terms of their "predictions" and analyses or do they all follow the HQ bank company line but report regional circumstances?

 
At 1/21/2012 10:51 AM, Blogger Don Culo said...

Even if a virtuous cycle of consumption-employment takes hold in 2012, there's been enormous economic damage over the past four years.

**************

This would never have happened if George W Bush were still president. The best economic times were at the end of the George Bush presidency !!!

 
At 1/21/2012 12:27 PM, Blogger Benjamin said...

Crickey Almighty, can we stop worrying about inflation now? Use your eyeballs and look at this chart.

When we have five years of robust growth, and the Dow is at a record high, and real estate is popping, and unemployment is down to 4 percent, then maybe--maybe--I will worry about inflation.

Please bring to me a day that I worry about inflation.

BTW, Dr Perry is to be congratulated for thinking independently. I often disagree with Dr. Perry, but he subscribes to no partisan straightjackets, and marches to the drummer he loves best.

As we all should.

 
At 1/21/2012 4:09 PM, Blogger Jon Murphy said...

This economic recovery may be the weakest in U.S. history, even with the massive government "stimulus."

Believe it or not, PeakTrader, but we are growing faster out of this recession than the previous two. It just feels weaker because the drop was so deep.

 
At 1/21/2012 9:17 PM, Blogger PeakTrader said...

Jon, normally, severe recessions are followed by strong recoveries.

For example, you may want to look at the output gap:

http://voices.washingtonpost.com/ezra-klein/ouyputhap2.jpg

 
At 1/22/2012 12:12 AM, Blogger OBloodyHell said...

>>> there's been enormous economic damage over the past four years.

It's called creative destruction, and, as part of the boom/bust cycle, it's necessary to deal with malinvestments.

The severity of it comes from, as ever, government meddling in a process it has no concept of, for reasons having nothing to do with rational improvements in anything but this coming cycle's election prospects.

 

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