Philly Fed Releases New Inflation Expectations Series Based on Aruoba Research
On March 22, 2016, the Federal Reserve Bank of Philadelphia issued the first release of a new monthly inflations expectations data series that has been given the name of ATSIX (Aruoba Term Structure of Inflation Expectations). This new product is based on research carried out by University of Maryland faculty member Boragan Aruoba. It will be updated around the 20th of each month.
The ATSIX product will consist of two parts. First, each monthly release will contain information on the term structure of inflation expectations as of that point in time. This information will tell data users what rate of growth in consumer prices (CPI) households expect for time periods from 3 months up to 10 years from the date of the release. Second, the term structure of real interest rates for U.S. government bonds with maturities ranging from 3 months to 10 years consistent with those inflation expectations will be reported. The ATSIX inflation expectations measures are computed using a model that combines information from the Survey of Professional Forecasters published by the Federal Reserve Bank of Philadelphia and the Blue Chip Surveys published by Wolters Kluwer Law & Business.
Professor Aruoba explains: “Anyone who is interested in U.S. monetary policy should find these measures useful. One of the biggest challenges currently facing those responsible for U.S. monetary policy is the seeming difficulty in getting inflation back to the Federal Reserve’s target. The inflation expectations curve will show how inflation is expected to evolve and, when policy actions or other events occur, how that expected path of evolution changes. The new measures also should be useful to anyone who is pricing a nominal asset of some arbitrary maturity and is interested in what the real rate of return on the asset is likely to be. The right information for carrying out these sorts of calculations was not previously available. The fact that updates of these measures will be released every month, reflecting all of the information that has become available since the prior release, makes them truly real-time and especially valuable.”