## Inflation Expectations in the U.S.: Linking Markets, Households, and Businesses

_IMF Working Papers, November 13, 2020_

## Source details

**Canonical URL:** [Inflation Expectations in the U.S.: Linking Markets, Households, and Businesses](https://www.imf.org/en/publications/wp/issues/2020/11/13/inflation-expectations-in-the-u-s-49815)

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## Bibliographic details
- Authors: Peter D. Williams
- Published: November 13, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513561158.001

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### Summary and main findings
- Inflation has been below the Federal Reserve’s target for much of the past 20 years, creating worries that inflation may be deanchoring from the FOMC’s target.
- The paper estimates long-run inflation expectations using a factor model that incorporates information from:
  - professional forecasters,
  - household and business surveys,
  - the market for Treasury inflation protected securities (TIPS).
- Long-run inflation expectations have fallen notably in the past few years — to roughly 1.9 percent for CPI inflation, well below the FOMC’s target.
- Evidence suggests that, even before the covid recession, the private sector viewed the economy as likely to suffer from persistent headwinds to inflation.

### Methodology and key concepts
- Uses a factor modeling approach to combine multiple information sources (forecasters, surveys, TIPS).
- Incorporates concepts and terminology including:
  - breakeven inflation series,
  - inflation risk premium,
  - no-arbitrage term structure model,
  - yield curve,
  - risk premia.

### Policy relevance and implications
- Persistent low long-run inflation expectations imply concerns about the deanchoring of inflation from the FOMC’s target.
- The findings are relevant for monetary policy, inflation targeting, liquidity considerations, and asset and liability management.

### Publication and metadata
- Author: Peter D. Williams
- Publication date: November 13, 2020
- Series: Working Paper No. 2020/240
- Issue: 240
- Volume: 2020
- Pages: 25
- DOI: https://doi.org/10.5089/9781513561158.001
- Stock No: WPIEA2020240
- ISBN: 9781513561158
- ISSN: 1018-5941
- Subjects and keywords include: Asset and liability management; Inflation; Inflation targeting; Liquidity; Monetary policy; National accounts; Oil prices; Prices; Return on investment; breakeven inflation series; CPI inflation; expectations survey; factor modeling; inflation risk premium; no-arbitrage term structure model; TIPS; yield curve.

*IMF Working Papers — Inflation Expectations in the U.S.: Linking Markets, Households, and Businesses (Working Paper No. 2020/240, Peter D. Williams).*

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_Source: https://www.imf.org/en/publications/wp/issues/2020/11/13/inflation-expectations-in-the-u-s-49815_