Monetary Policy Report submitted to the Congress on February 27, 2008, pursuant to section 2B of the Federal Reserve Act
Figure of TIPS-based inflation compensation, 2003-08. Data are plotted as curves. Ten-year inflation compensation begins 2003 at just below 2 percent, rises to just above 2 percent in the early part of that year, and then falls to about 1.75 percent around midyear. It increases to almost 2.5 percent in late 2003 and fluctuates between 2.3 percent and 2.8 percent over the remaining periods. Five-year inflation compensation is about 1.25 percent at the beginning of 2003 and then rises gradually to a peak of just under 3 percent in the first half of 2005. It then fluctuates within a 50 basis point band around 2.5 percent through the end of 2006, when it falls more sharply to about 2 percent. It rises again to nearly 2.5 percent in early 2007, falls back to a bit less than 2 percent after midyear, and then rises to about 2.25 percent late in the year. It then fluctuates between 2 percent and 2.25 percent through February 2008.
Note: The data are daily and extend through February 21, 2008. Based on a comparison of the yield curve for Treasury inflation-protected securities (TIPS) with the nominal off-the-run Treasury yield curve.
Source: Federal Reserve Board calculations based on data provided by the Federal Reserve Bank of New York and Barclays.