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 Slightly—May 26, 2016
The 2015–20 deflation probability was 2 percent on May 25, up from 1 percent on May 18. The 2016–21 deflation probability was 12 percent on May 25, up from 11 percent on May 18. 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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