"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