Optimal Policy and Market-Based Expectations.
- Bauer, Michael D, Glenn D. Rudebusch
- FRBSF Economic Letter 2015-12 (April
A substantial decline in market-based measures of inflation expectations has raised concerns about low future inflation. An important question to address is whether these measures contain information that can improve upon alternative forecasting methods. This analysis finds that market-based inflation forecasts generally are no more accurate than surveys of professional forecasters or simple forecast rules. This suggests that financial markets can provide little additional useful forward-looking information about inflation.