[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-324803-105":59,"doc-detail-324803-en":130},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":123,"head_meta":125,"extra_data":127,"updated_unix":129},105,"en","expected-inflation-and-tips-economic-commentary","Expected Inflation and TIPS - Economic Commentary","","Expected Inflation and TIPS explains how Treasury Inflation-Protected Securities (TIPS) can be used to infer expected future inflation by comparing nominal Treasury yields with real yields. It argues that the straightforward subtraction method is biased and discusses why TIPS-based expected inflation can underestimate what professional forecasters and households expect. The commentary attributes the mismatch to inflation risk and, more importantly, the relative illiquidity of the TIPS market, then presents a correction method to improve the expected-inflation series.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/expected-inflation-and-tips-economic-commentary/324803/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/expected-inflation-and-tips-economic-commentary/324803.png","ImageObject",300,407,{"name":92,"@type":93},"Skyler","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-28","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":24},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"How does the basic TIPS method estimate expected inflation?","Question",{"text":112,"@type":113},"It compares a nominal Treasury note’s yield with a TIPS real yield of the same maturity. In principle, subtracting the TIPS real yield from the nominal yield isolates the expected inflation component.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"Why can TIPS-based expected inflation be biased?",{"text":117,"@type":113},"The document states that the key calculation assumes equal real yields across nominal and TIPS securities. When inflation risk and differences between how real returns are formed create gaps in real yields, the inferred expected inflation becomes biased.",{"name":119,"@type":110,"acceptedAnswer":120},"What role does the TIPS market’s liquidity play in the results?",{"text":121,"@type":113},"It argues that the relatively low liquidity of the TIPS market can cause the TIPS-based expected inflation measure to understate actual expected inflation, outweighing the opposite-direction effect of inflation risk.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},324803,1790467872,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":24,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},2336464648746,"https://ap-avatar.wpscdn.com/davatar_276721f389ce27ea32af1340a28f341c","# Expected Inflation and TIPS\n\nby Charles T.Carlstrom and Timothy S.Fuerst  \nnew security.This security,a bond calledTIPS,for \"Treasury Inflation-ProtectedSecurities,\"is unique in the sense that itsreturns are indexed to inflation,thuspromising bondholders a sure real returnover the lifeof the bond.Unlike nominalTreasury notes,the real return of a TIPSis fixed at auction time.The face valueand the coupon payments are indexed tothe inflation rate,so they grow at thatrate.Once the security is purchased,increases in inflation do not reduce aninvestor's real return.This is much dif-erent than a nominal Treasury note,where changes in inflation directly influ-ence the realized real return of the bond.  \nThe potential benefit of TIPS,however,goes beyond the inflation protectionoffered to bondholders.TIPS alsopromise economists and policymakers apotential way to tease out of the data themarket's expectations for the futurecourse of inflation.In principle,sub-tracting the real yield on TIPS from thenominal yield of Treasury notes of thesame maturity should give policymakersand economists a market-based measureof expected inflation.  \nBut thus far the results have been lessthan encouraging.Ten-year expectedinflation rates derived from the TIPSmarket have run approximately 50 basispoints lower than the inflation expecta-tions of professional forecasters(obtained from the Survey of Profes-sional Forecasters),and a full percentagepoint lower than those of households(asmeasured by the University of Michi-gan's Survey of Consumers;see figure  \n1).Of course,survey measures ofexpected inflation have a multitude ofproblems associated with them.How-ever,the available evidence stronglysuggests that expected inflation derived  \nfrom the TIPS market underestimatesactual expected inflation.  \nIn this Economic Commentary weexplore why the TIPS-based measuremay have underestimated expected infla-tion.We show that there are two counter-vailing factors influencing the measure.First,inflation risk,in and of itself,implies that TIPS-based expected infla-tion should overstate actual expectedinflation.Second,and even more impor-tant,is the relative illiquidity of the TIPSmarket,which leads TIPS-basedexpected inflation to understate actualexpected inflation.  \nWe demonstrate a method of correctingfor the biases caused by the illiquidity ofthe TIPS market and inflation risk.Themethod produces a TIPS-based seriesthat can serve as a measure of expectedinflation,one that is potenially moreaccurate than the unadjusted TIPS seriesUsing the adjusted series,we examineseveral interesting time periods.We showinstances where the new series uncoverspotential movements in expected infla-tion that the uncorrected TIPS series doesnot reveal.Similarly,there are periods forwhich the uncorrected TIPS series incor-rectly indicates movements in expectedinflation,but for which the adjustedseries suggests no change occurred.  \n## ■ Inflation Risk and TIPS-Based Expected Inflation\n\nRemember that,in principle,expectedinflation should be accurately measuredby subtracting the real yield on TIPSfrom the nominal yield on Treasurynotes of the same maturity.The reason itis supposed to work this way is that thenominal yield on Treasury notes consistsof a real returm plus compensation forthe inflation rate that is expected tooccur over the horizon of the security.  \nWhen inflation-indexed Treasurysecurities were first introduced,econ-omists hoped that they could be usedto measure expected inflation easily.The only difference between securi-ties that were indexed to inflation andthose that were not was thought to bethe extra compensation regular secu-rities had to pay for what the marketthought inflation would be.By now itis pretty clear that inflation-indexedTreasuries differ from regular securi-ties in other ways that show up in theyields.This Commentary suggestswhat these are and discusses amethod of correcting for them.  \nBut here is the rub:the calculationassumes that the real yields o","cbCaijY49WFxjLVT","https://ap.wps.com/l/cbCaijY49WFxjLVT","pdf",1146440,"English","# Inflation Risk and TIPS-Based Expected Inflation\n# Liquidity and the TIPSMarket","[{\"question\":\"How does the basic TIPS method estimate expected inflation?\",\"answer\":\"It compares a nominal Treasury note’s yield with a TIPS real yield of the same maturity. In principle, subtracting the TIPS real yield from the nominal yield isolates the expected inflation component.\"},{\"question\":\"Why can TIPS-based expected inflation be biased?\",\"answer\":\"The document states that the key calculation assumes equal real yields across nominal and TIPS securities. When inflation risk and differences between how real returns are formed create gaps in real yields, the inferred expected inflation becomes biased.\"},{\"question\":\"What role does the TIPS market’s liquidity play in the results?\",\"answer\":\"It argues that the relatively low liquidity of the TIPS market can cause the TIPS-based expected inflation measure to understate actual expected inflation, outweighing the opposite-direction effect of inflation risk.\"}]","Expected Inflation and TIPS - Economic Commentary | PDF",1789968910,13]