Hey kids, I just want to make sure I’m interpreting these Bloomberg charts right. As usual, please be clear when you chime in, if you actually know what you’re talking about, or if you are just guessing. Guessing is welcome, but just be clear if that’s what you’re doing, please.
So I think this chart shows that the average expected price inflation over the next 5 years was about 1.9% in the beginning of the month, then surged to about 2.4% right after QE3, and then fell back to about 2.17% as of right now.
This chart, in contrast, shows that the expected rate of price inflation in 2017 (i.e. not the average, just the one-year rate five years from now) was about 2.4% in early September, then surged to about 2.85% after QE3, and now is about 2.80%.
Am I reading these charts right? In particular I’m worried that the number reported for these securities, actually translates into the percentage price inflation rate. Is that the right way to read them?
(Also, I’m aware of all the pitfalls in these methods of calculating “the market’s expectation of price inflation.” But I just want to make sure I’m reading the charts right.)