Long-term inflation expectations

Beyond the ten-year horizon

The other day, I wrote about a forecast for inflation using implied breakeven inflation rates. That forecast used the ten-year breakeven rate. But, that’s not the only inflation breakeven rate available:

There are five commonly used implied rates for 5, 7, 10, 20, and even 30 year horizons. For example, just looking at the chart right now, inflation over the next five years is expected to be 2.59% but over a longer thirty year horizon is a more modest 2.25%.

This means, we can make an even longer forecast projection than just ten years using our current approach. It also means we can have varying rates of inflation over that horizon. So, tomorrow, we can look at an example for how to calculate that!

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