This graph is courtesy of my colleague, Kevin Kliesen.
If you squint your eyes near the end of the sample, you'll see that Operation Twist appeared, on impact, to move short and long inflation expectations in opposite directions. The effect did not last long, however. The march downward continues--for now, at least.
Update: October 7, 2011
At the request of one of my readers, I had my RA (Constanza Liborio) plot a measure of inflation forecast errors over the last five years.
The inflation rate data is based on headline CPI. We use quarterly inflation at annual rates, and then subtract off the rate of inflation expected in a quarter, 2 and 5 years prior. The results are plotted here:
If you squint your eyes near the end of the sample, you'll see that Operation Twist appeared, on impact, to move short and long inflation expectations in opposite directions. The effect did not last long, however. The march downward continues--for now, at least.
Update: October 7, 2011
At the request of one of my readers, I had my RA (Constanza Liborio) plot a measure of inflation forecast errors over the last five years.
The inflation rate data is based on headline CPI. We use quarterly inflation at annual rates, and then subtract off the rate of inflation expected in a quarter, 2 and 5 years prior. The results are plotted here:
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