Inflation Expectation Indicators Based on Financial Instrument Prices

12 Pages Posted: 6 Oct 2017

Date Written: July 21, 2017


This article shows how indicators of agents’ inflation expectations can be derived from the prices of various financial instruments and presents the estimates obtained for the euro area and the United States. The results show that these metrics have reacted to economic and monetary decisions made in recent years, and that, on average, expected inflation is lower and less volatile in the euro area than in the United States.

Moreover, since end-2016 there has been a marked rise in the probability of observing longterm inflation rates above 2% in the United States, coinciding with the likely change in the country’s economic policy stance. Changes in the indicators for the euro area have been less pronounced over this period, although a marked drop in the probability of low or negative inflation rates has been observed.

Suggested Citation

Fuertes, Alberto and Gimeno, Ricardo, Inflation Expectation Indicators Based on Financial Instrument Prices (July 21, 2017). Banco de Espana Article 16/17. Available at SSRN:

Alberto Fuertes (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014

Ricardo Gimeno

Banco de España ( email )

Madrid 28014

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