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How is expected inflation measured for policy purposes? Is it based on some economic model or some survey?

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  • $\begingroup$ To get an accurate answer you probably have to specify which country you are curious about. $\endgroup$ – Giskard Nov 12 '15 at 7:40
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There are three big sources for data on inflation expectations in the US:

  1. Market implied expectations from the TIPS spread. TIPS securities provide inflation protection but are otherwise roughly comparable to normal treasuries, so the difference in yields between these two is a measure of expected inflation.
  2. Consumer expectations from the University of Michigan Survey of Consumers, which you can find here.
  3. Surveys of professional forecasters, such as this survey.

Which of these measures is most useful is not clear, and I've seen all three used at different times and in different places. This speech by Janet Yellen has some discussion of the different measures, as does this paper by Carola Binder.

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