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 August 19, 2015 update states the following:
The estimate of 2015–20 deflation probability—based on the five-year TIPS issued in April 2015 and the 10-year TIPS issued in July 2010—was 0.1 percent on August 19. Since being pinned at 0 percent from its initial estimate on April 30 to August 10, this deflation probability has fluctuated between 0.0 and 1.3 percent.
Prices of Treasury Inflation-Protected Securities (TIPS) with similar maturity dates in 2020 can be used to measure probabilities of a net decline in the consumer price index over 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 1949.85 this post is written