What markets and households think inflation will be — 5- and 10-year breakevens from TIPS, the 5y5y forward the Fed watches, the Cleveland Fed's model, and the Michigan consumer survey. Expectations are self-fulfilling: workers bargain and firms price on them, which is why the Fed treats this page's series as its anchor gauge.
The gap between market-priced and survey expectations is itself a signal — households anchor on grocery and gas prices, markets on the Fed's credibility. When both drift up together, the anchor is slipping.
Two kinds of evidence about where inflation is headed. Market breakevens are the gap between a nominal Treasury yield and the yield on an inflation-protected Treasury (TIPS) of the same maturity — the average inflation rate at which the two would pay the same, so the rate the market is pricing; they move every trading day. Survey and model measures come from households (the University of Michigan and the New York Fed's consumer surveys) and from the Cleveland Fed's model, monthly and slower to move.
| Measure | Latest | As of | A year earlier | Change |
|---|---|---|---|---|
| 5-year breakeven (TIPS) | 2.37% | October 16, 2026 | 2.29% | +0.08pp |
| 10-year breakeven | 2.35% | October 16, 2026 | 2.28% | +0.07pp |
| 5-year, 5-year forward | 2.33% | October 16, 2026 | 2.27% | +0.06pp |
| 10-year TIPS real yield | 2.78% | October 15, 2026 | 1.76% | +1.02pp |
| Cleveland Fed 1-year expected inflation (model) | 2.98% | October 2026 | 2.73% | +0.25pp |
| Cleveland Fed 10-year expected inflation | 2.73% | October 2026 | 2.30% | +0.43pp |
| Michigan survey, 1-year ahead (median) | 4.0% | August 2026 | 4.8% | -0.8pp |
| NY Fed consumer survey, 1-year ahead (median) | 3.9% | September 2026 | 3.4% | +0.5pp |
The 5-year, 5-year forward is the Fed's preferred market gauge because it strips out the next five years — the part contaminated by today's oil price and the current cycle — and shows expected inflation over the five years after that. At 2.33% it is +0.33pp from the 2% target; an anchor is holding when the forward stays near 2% while near-term breakevens jump, and slipping when the forward moves with them. The gap between market and household expectations is itself a signal: households anchor on groceries and gasoline, markets on the Fed's credibility, so the Michigan median (4.0%) usually sits above the 5-year breakeven (2.37%); when both drift up together the anchor is slipping. Breakevens also carry a liquidity and risk premium — TIPS trade less than nominals — so a few tenths of a point are not expectations at all. Note that FRED withholds the most recent Michigan month, so the survey value shown can be one month behind the press release.
Expectations are self-fulfilling in the medium run: workers bargain and firms set prices on the inflation they expect, which is why the Fed treats these series as its anchor gauge and sets its 2% goal on headline PCE (3.42% for August 2026), with core PCE (3.01% for August 2026, +1.01pp from 2%) as the trend measure it watches most closely. A Gauge at 3.45% is a measurement of prices now; if long-run expectations stay anchored a hot print is treated as noise, and if they drift it is a regime change — the tension the Gauge, the forecast and the Fed Watch page are built to track. Sources: Treasury and TIPS yields, the Cleveland Fed, the University of Michigan and the New York Fed, all via FRED.