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 2020.

Note: There is no Deflation Probabilities update on August 27, 2015. The next update will occur September 3.

2015–20 Deflation Probability Was 0.1 Percent on August 19—August 20, 2015

The estimate of 2015–20 deflation probability—based on the five-year TIPS issued in April 2015 and the 10-year TIPS issued in July 2010—was 0.1 percent on August 19. Since being pinned at 0 percent from its initial estimate on April 30 to August 10, this deflation probability has fluctuated between 0.0 and 1.3 percent.

Prices of Treasury Inflation-Protected Securities (TIPS) with similar maturity dates in 2020 can be used to measure probabilities of a net decline in the consumer price index over the five-year period starting in early 2015.

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