The Economic Cycle Research Institute (ECRI) - a New York-based independent forecasting group, released its latest readings for its proprietary monthly Future Inflation Gauges this morning. ECRI says the value of their U.S. Future Inflation Gauge (USFIG) "lies in its ability to measure underlying inflationary pressures and thereby predict turning points in the U.S. inflatinon cycle." (More about ECRI)
In May, the USFIG fell to 101.0, down from a revised 102.9 in April. My chart below of CPI vs. USFIG vs. "expected inflation" for the next decade shows USFIG was down for the second straight month.
Commenting on today's release, ECRI's Co-Founder, Chief Operations Officer and author of "Beating the Business Cycle," Lakshman Achuthan said: "With the USFIG hitting a seven-month low, underlying inflation pressures have clearly begun to recede."
To get an idea of how much inflation the bond market expects for the next decade, you can subtract the base rate for the 10-year TIPS (0.71%) from the current yield of a 10-year U.S. Treasury note (3.02%) to get 2.31%.
Likewise, you can do the same calculation for the 30-year TIPS and 30-year U.S. Treasury bond to see the bond market expects inflation to average 2.49% over the next 30 years.
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This next chart shows ECRI's USFIG vs. expected inflation using 10 and 30 year U.S. Treasuries.
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Disclosure: I own individual TIPS purchased directly trom the U.S. Treasury and Series I-Bonds. I also cover them in my newsletters with individual TIPS currently in my recommended "explore" portfolio.
