Longer-term deflation probabilities remain stable

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 ticked up from 10 percent on May 11 to 11 percent on May 18. It has remained within a narrow 8–12 percent range since shortly after its history started with the issuance of the new five-year TIPS in late April. An alternative lower bound on the probability of deflation remained at 0 percent after rounding.

Categories: deflation