Inflation Expectations is a monthly indicator published by the Federal Reserve Bank of Cleveland.
It estimates the rate at which market participants and forecasters expect inflation, as measured by the Consumer Price Index (CPI), to run over horizons from one year to 30 years.
A Cleveland Fed model combines financial data and survey-based measures to produce the estimate.
The Cleveland Fed’s Center for Inflation Research releases the indicator each month, timed to the CPI release from the Bureau of Labor Statistics.
The series is available for public download going back to 1982.
It’s also distributed through the Federal Reserve Bank of St. Louis’s FRED database under series codes such as EXPINF1YR, EXPINF5YR, and EXPINF10YR (EXPINF5YR, EXPINF10YR).
Origins and methodology
Development
Cleveland Fed economist Joseph G. Haubrich developed the model with George Pennacchi and Peter Ritchken. A working paper described it first.
An August 2009 Economic Commentary, “A New Approach to Gauging Inflation Expectations,” explained it for a general audience (Haubrich 2009).
The Review of Financial Studies later published the academic version, “Inflation Expectations, Real Rates, and Risk Premia: Evidence from Inflation Swaps” (Haubrich, Pennacchi, and Ritchken, 2012).
Model inputs
The model draws on Treasury yields, inflation data, inflation swaps, and survey-based measures of inflation expectations.
The Cleveland Fed’s inputs include:
- Blue Chip forecasts of CPI
- Inflation swap data
- Current-month CPI numbers
- Historical (vintage) CPI data from FRED
- One-month to six-month Treasury bill yields at constant maturity
- One-year to fifteen-year US Treasury zero-coupon yields
- The Survey of Professional Forecasters’ median ten-year-ahead CPI inflation expectation
Separating expectations from risk premia
The model separates raw market pricing into distinct components. Beyond expected inflation, it produces estimates of the inflation risk premium, the real risk premium, and the real interest rate.
The inflation risk premium is the compensation investors demand for the risk that inflation deviates from their expectations over the life of a bond.
The real risk premium compensates for uncertainty about future real interest rates.
The real interest rate is the return on a bond after stripping out both expected inflation and the two risk premiums, the rate of return an investor earns in terms of actual purchasing power.
Comparison to the break-even rate
Because the model backs out the inflation risk premium, its expected-inflation estimate isn’t the same thing as the simple “break-even” rate, which is calculated by subtracting Treasury Inflation-Protected Securities (TIPS) yields from nominal Treasury yields and includes that premium.
Release schedule and figures
The Cleveland Fed runs the model on CPI release day and publishes results before 4 p.m.
Figures are annualized: a reported 1.5 percent for the 10-year horizon means inflation is expected to average 1.5 percent per year over the decade.
Handling delayed CPI data
The model relies on the current month’s CPI figure as an input, so a delayed release forces a substitution.
When the Bureau of Labor Statistics didn’t release the October 2025 CPI value on schedule, the Cleveland Fed used its own Inflation Nowcasting estimate for that month instead.
Relationship to other Cleveland Fed indicators
The Cleveland Fed’s Center for Inflation Research maintains several other inflation indicators alongside this one.
Median CPI and Median PCE inflation rank the components of each index and select the middle value. This construction filters out short-lived price swings and isolates the underlying trend.
The Survey of Firms’ Inflation Expectations (SoFIE) is a large, quarterly, nationally representative panel of manufacturing and services firms that measures what CEOs and other top executives expect inflation to do. Olivier Coibion and Yuriy Gorodnichenko first fielded it in the second quarter of 2018.
Inflation Nowcasts give a same-day estimate of where CPI and PCE inflation currently stand.
Why inflation expectations are tracked
Feedback into economic behavior
Central banks track inflation expectations because expectations feed back into the behavior that produces actual inflation.
This shows up across the economy:
- Firms set prices partly on what they expect competitors to charge in the future, since prices don’t adjust continuously.
- Workers build expected inflation into wage negotiations because they care about what their paychecks will buy.
- Lenders price expected inflation into the interest rates they charge, to protect the real return they want.
That forward-looking behavior is why the Cleveland Fed measures and monitors expectations at all.
A diagnostic tool for policymakers
Expectations also serve a diagnostic role.
Long-run inflation expectations tell policymakers whether their stated inflation targets are credible and whether the public’s expectations are “anchored,” meaning they don’t move much in response to short-term swings in incoming data.
Economists call expectations well anchored when actual inflation runs above or below target for a stretch without shifting the public’s longer-run expectations.
A 2021 Cleveland Fed Economic Commentary put it directly: people’s expectations about future inflation influence their behavior, and that behavior shapes inflation itself, so expectations should give clues about where inflation is headed.
The same article treated this link as strong enough that central banks watch it closely, tracking whether expectations stay anchored at the policy target.
Evidence on predictive value
The Cleveland Fed model competes with several other approaches to measuring inflation expectations.
Cleveland Fed researchers have tested its track record as a predictor directly, and the results depend on which time period and inflation measure you look at.
The Verbrugge and Zaman study
Cleveland Fed economists Randal J. Verbrugge and Saeed Zaman took this on directly in a 2021 study, “Whose Inflation Expectations Best Predict Inflation?”
They compared the Cleveland Fed model against three other measures:
- Household expectations from the University of Michigan Surveys of Consumers,
- Professional forecaster expectations from Blue Chip Economic Indicators.
- Firm-level expectations from the Federal Reserve Bank of Atlanta’s business inflation expectations survey.
Running both in-sample regressions and out-of-sample forecasting tests on data going back to the mid-1980s, they found professional economists and businesses had been notably more accurate at predicting inflation one year out than households were.
The Cleveland Fed model, which captures financial-market expectations, landed in the middle.
Cross-correlations
Simple cross-correlations told a similar story.
Over the longer sample dating to the mid-1980s, the Cleveland Fed model and Blue Chip both showed similar, moderately high correlations with CPI inflation, in the 0.6 to 0.7 range.
After 2011, those correlations dropped, and some turned negative at higher lags. That points to a weaker ability to predict one-year-ahead inflation in the more recent period.
The Cleveland Fed model’s expectations correlated strongly with core CPI inflation specifically, which suggests financial markets weight core inflation heavily when they form expectations about the overall number.
Firm-level expectations, by contrast, tracked volatile energy prices more closely.
In-sample and out-of-sample results
The in-sample regressions ranked Blue Chip as the consistent best predictor and the Michigan consumer survey as the worst.
The Cleveland Fed model performed well over the full sample but turned into a poor predictor after 2011.
Out-of-sample, Blue Chip beat both the Michigan survey and the Cleveland Fed model at the one-year horizon over the longer evaluation window, with the Cleveland Fed model’s accuracy landing in the middle of the four measures.
For CPI inflation specifically, though, the gap in forecast accuracy between the Cleveland Fed model, Blue Chip, and the Atlanta Fed survey was small.
Verbrugge and Zaman concluded that the Cleveland Fed model, read as a proxy for financial-market expectations, trailed the professional-economist and business measures in accuracy.
A simple benchmark time-series model, meanwhile, matched those two measures roughly step for step.
Distinguishing temporary from persistent inflation
A 2011 Cleveland Fed Economic Commentary shows one practical use of the indicator: telling a temporary inflation spike from a persistent one.
In that article, Haubrich used the model’s estimates to argue that a jump in consumer price inflation at the time was likely to prove temporary.
That separates a current inflation reading from the market’s read on where inflation is headed.
Limitations
No single best measure of inflation expectations
Cleveland Fed researchers warn against treating any single measure of inflation expectations, their own model included, as a definitive forecast.
No consensus exists on whether model-based or survey-based approaches work better, which is why the Center for Inflation Research publishes both types rather than picking a winner.