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 2021.

Deflation Probabilities Increase—April 27, 2017

The 2016–21 deflation probability was 3 percent on April 26, up from 2 percent on April 19. The 2015–20 deflation probability was 4 percent on April 26, up from 3 percent on April 19. These 2015–20 and 2016–21 deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2015 and early 2016, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2015 and April 2016 and the 10-year TIPS issued in July 2010 and July 2011.

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