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Philadelphia Fed Introduces New Measure of Inflation Expectations

For immediate release
Contact: Rachel Brown, E-mail Media Relations, 215-574-3840

Philadelphia, PA — The Federal Reserve Bank of Philadelphia’s Real-Time Data Research Center today launched the Aruoba Term Structure of Inflation Expectations (ATSIX), a smooth, continuous curve of inflation expectations three to 120 months ahead.

“We think the ATSIX will be useful to policymakers, researchers, and business analysts for studying how inflation expectations and real interest rates evolve and respond to monetary policy,” said Fatima Mboup, a senior research assistant in the Real-Time Data Research Center.

Inflation expectations are commonly gauged in two ways — from expected inflation rates implied in market interest rates and from surveys of economists or consumers. Measures of expected inflation based on surveys of economists have been found to be generally superior to market-based measures. However, because surveys ask respondents to forecast inflation rates for noncontiguous time horizons, the resulting data points are widely spaced. The ATSIX resolves these complications by creating a smooth curve of inflation expectations using a statistically optimal method to combine survey-based measures: the Philadelphia Fed’s Survey of Professional Forecasters, and the Blue Chip Economic Indicators and Blue Chip Financial Forecasts published by Wolters Kluwer Law & Business.

The ATSIX will be updated around the 20th of each month after the source data are released.

The Real-Time Data Research Center, part of the Philadelphia Fed’s Research Department, is a source of knowledge and expertise about real-time macroeconomic data, surveys of macroeconomic forecasts, and macroeconomic modeling. The center produces macroeconometric analyses and collects and maintains a variety of data sets of value to macroeconomists and monetary policymakers, including the real-time data set for macroeconomists, the Livingston Survey, the Survey of Professional Forecasters, the Greenbook data sets, GDPplus, and the Aruoba-Diebold-Scotti business conditions index.

The Federal Reserve Bank of Philadelphia helps formulate and implement monetary policy, supervises banks and bank and savings and loan holding companies, and provides financial services to depository institutions and the federal government. It is one of the 12 regional Reserve Banks that, together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Philadelphia Federal Reserve Bank serves eastern Pennsylvania, southern New Jersey, and Delaware.

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