The monthly 10-year Breakeven Inflation Rate over the last ten years is displayed above and represents a market-based measure of expected inflation derived from the spread between 10-Year Treasury Constant Maturity Securities and 10-Year Treasury Inflation-Indexed Constant Maturity Securities as calculated and reported by the St. Louis Federal Reserve. The latest value from the Treasury spread in June implies that bond market participants expect inflation to average 2.23% annually over the next 10 years. In other words, the current bond market-determined measure of expected inflation, based on thousands of bond market participants who are putting millions of dollars at stake, suggests that inflation will remain low and stable over the next ten years at less than 2.50%. More market-based evidence that there are currently no inflationary pressures building in the US economy, even over a ten-year horizon.
Update: Here’s a related chart below of the “Expected Inflation Yield Curve” from 2015 to 2044, based on the Cleveland Fed’s estimates of inflation expectations for one-year periods out to a time horizon of 30 years. According to the Cleveland Fed:
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 Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is 1.83% (see chart below). In other words, the public currently expects the inflation rate to be less than 2 on average over the next decade.