Distinguishing Inflation Expectations from Observed Inflation Data

Summary

The document clarifies that daily inflation breakeven curves represent market-implied forward inflation expectations, rather than observed inflation such as consumer price index readings. It explains that these curves are derived from bond or inflation swap prices, which helps account for why broadly available daily series may be scarce. It also points to UK breakevens based on retail price inflation as one publicly published example.

The answer cautions that breakevens derived from inflation swaps and those implied by inflation-linked bonds are not identical measures. The document offers no method for converting low-frequency realized inflation observations into daily estimates, nor does it compare the biases or construction details of different markets. For research use, the central lesson is to define whether the target is realized inflation or priced inflation expectations, and to identify the instrument underlying any curve before comparing datasets.

Key ideas

• Breakeven curves express market-implied inflation expectations rather than observed CPI inflation.
• Inflation expectations can be inferred from bond or inflation swap prices.
• Public daily curves may be limited because the underlying pricing data is often proprietary.
• Inflation swap breakevens and inflation-linked bond breakevens can differ.
• The document does not provide a procedure for estimating daily realized inflation.

Tags

# Looking for datasets with daily inflation rate for as many countries as possible


# Looking for datasets with daily inflation rate for as many countries as possible












Here's an example of the kind of thing I'm looking for https://fred.stlouisfed.org/series/T10YIE

I'm also happy to perform transformation on other data to get an estimated/approximated daily value if anyone is acquainted with a good method to do so

## Answer by william smith (score 3)

https://quant.stackexchange.com/a/59270

These are breakeven curves, you should make it clear that you are looking for the forward expectation of inflation, not observed inflation (i.e. not the CPI indexes).

They are not normally published because they are derived from bond or swap prices which are typically proprietary to the relevant trading platform.

UK publishes breakevens for RPI (not CPI) here: https://www.bankofengland.co.uk/statistics/yield-curves

Note, you also need to distinguish between curves derived from inflation swaps, and curves derived from inflation linked bonds. They won't be identical.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.