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Federal Reserve Bank of Philadelphia Aruoba Term Structure of Inflation Expectations (ATSIX)

Excerpt:  “The Aruoba Term Structure of Inflation Expectations (ATSIX) is a smooth, continuous curve of inflation expectations three to 120 months ahead, analogous to a yield curve. A term structure of real interest rates is then obtained from the difference between the nominal yield for a particular horizon and ATSIX inflation expectations over the same horizon. Note that this method leaves an inflation risk premium inside the estimates for the real interest rates. … The ATSIX is useful to policymakers and researchers for studying how inflation expectations and real interest rates evolve and respond to monetary policy and the effect of policy on the term structure of real interest rates, a key transmission mechanism of policy. It is also useful to market participants for pricing securities whose returns are linked to inflation expectations at arbitrary horizons.”