Deflation Probabilities – June 4, 2015 Update

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”

As stated on the site:

Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2020.

A chart shows the trends of the probabilities.  As one can see in the chart, the readings are volatile.

As for the current weekly reading, the June 4, 2015 update states the following:

The estimates of 2015–20 deflation probabilities—based on the 5-year Treasury Inflation-Protected Securities (TIPS) issued in April and the 10-year TIPS issued in July 2010—have all been 0 percent for April 30 through June 3. The 2014–19 deflation probability is also 0 percent as of June 3.

Prices of TIPS with similar maturity dates can be used to measure probabilities of a net decline in the consumer price index over the five-year period starting in early 2014 or the five-year period starting in early 2015.

I plan on providing updates to this measure on a regular interval.


I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 2095.84 this post is written