Term Structures of Inflation Expectations and Real Interest Rates


I use a statistical model to combine various surveys to produce a term structure of inflation expectations — inflation expectations at any horizon — and an associated term structure of real interest rates. Inflation expectations extracted from this model track realized inflation quite well, and in terms of forecast accuracy, they are at par with or superior to some popular alternatives. Looking at the period 2008–2015, where the Federal Reserve conducted a number of unconventional policies following the financial crisis, I conclude that long-run inflation expectations remained anchored, and real interest rates at all horizons declined to exceptionally low levels.

First draft  : August 2014

Federal Reserve Bank of Philadelphia is producing ATSIX (Aruoba Term Structure of Inflation Expectations) based on this paper.


Federal Reserve Bank of Minneapolis Staff Report [August 2014]

Federal Reserve Bank of Philadelphia Working Paper [March 2016]

Most Recent Working Paper  [December 2016]

Press and Blog Mentions

Econ Browser [May 2016]

Additional Materials

Movie of Inflation Expectations (1992-2015)

Maryland Center for Economics and Policy (MCEP) Summary