September 1, 2011
Prices of Treasury Inflation-Protected Securities (TIPS) with similar maturity dates can be used to measure probabilities of a net decline in the consumer price index over the five-year period starting in early 2011. One measure of this deflation probability was 17 percent on August 31. This reading was the same as last week, but still up from the end of July, when it was 12 percent. An alternative lower bound on the probability of deflation ticked up from 2 percent on August 24 to 3 percent on August 31.