«Popular market measures of US inflation expectations are climbing sharply higher in the wake of this week’s Federal Reserve meeting, which analysts say hinted at officials being willing to tolerate higher inflation before tightening monetary policy more aggressively.
So-called “breakeven rates”, which are a rough estimate of expected inflation derived from comparing the yields of conventional and inflation-proof Treasuries, have jumped markedly this month, and have gone even higher since Wednesday’s Fed meeting»
Could you please explain how are these breakeven rates estimated? And why they can be a 'rough estimate' of expected inflation?
Any help would be appreciated.