Reply: No.
Right here’s an image of CPI inflation expectations errors on the 5 12 months horizon.
Determine 1: Precise 5 12 months ex publish inflation minus anticipated from 5 12 months Treasury-TIPS breakeven (darkish blue line), from Treasury-TIPS breakeven adjusted for premia by KWW following DKW (tan), from Survey of Skilled Forecasters median (blue +), from Cleveland Fed (pink), from lagged ex publish one 12 months inflation (sky blue). NBER outlined peak-to-trough recession dates shaded grey. Supply: For CPI, BLS through FRED (CPIAUCSL); inflation charges calculated by creator utilizing precise formulation (not log approximations). Treasury and TIPS from FRED (GS5, FII5), for adjusted breakeven KWW (accessed 4/8), for SPF Philadelphia Fed, Cleveland Fed, and NBER.
I’ve supplied hyperlinks to the precise knowledge sources since reader JohnH has written: “It’s laborious to argue with knowledge that doesn’t hyperlink to any particular supply knowledge!”
Over the 2008M01-2023M02 interval, the smallest imply error (in absolute worth) is for the Cleveland Fed. The smallest median error (in absolute worth) is for the Cleveland Fed. The most important most forecast error is for one 12 months lagged inflation. The smallest minimal forecast error is for one 12 months lagged inflation. The most important imply squared forecast error (by far!) is for one 12 months lagged inflation.
I feel it affordable to conclude (in case you didn’t already realize it) that adaptive expectations utilizing one 12 months lagged inflation is a nasty predictor for 5 12 months forward (or 10 12 months forward) inflation.
