Deflation Probabilities

Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2022.

Deflation Probabilities Unchanged—May 25, 2017

The 2017–22 deflation probability was 6 percent on May 24, unchanged from May 17. The 2016–21 deflation probability was 0 percent on May 24, also unchanged from May 17. These 2016–21 and 2017–22 deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2016 and early 2017, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2016 and April 2017 and the 10-year TIPS issued in July 2011 and July 2012.

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