A0826
Title: Are treasury BEIs inflation expectations?
Authors: Michael Owyang - Federal Reserve Bank of St Louis (United States) [presenting]
Abstract: Breakeven inflation rates (BEIs) are computed from the difference in yields on standard and inflation-protected Treasury securities. These BEIs are often interpreted as market-based inflation forecasts and used in empirical models as a measure of representative agent expectations. Previous studies, however, have shown that these market-based forecasts are not rationalizable for standard squared error loss functions. This result was obtained, in part, because the BEIs are not unbiased. The forecast rationality of BEIs is reconsidered using an alternative loss function that allows for asymmetric preferences.
