Do 5 year inflation forecasts exist?

[Sims]

I can't find one.
But i was thinking, the governement will always try to stabalize it around what they think is optimal, usually around 2%, thus meaning that longer than 1 year a forecast wouldn't make sense.
Is this correct?

 

[morty]

try the spread on 5yr treasuries relative to 5yr TIPs

 

[Sims]

morty Wrote:
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> try the spread on 5yr treasuries relative to 5yr
> TIPs


I'm looking for something in Canada, I don't think we have TIPS here but then again that is not my area of expertise

 

[JoeyDVivre]

Sims Wrote:
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> I'm looking for something in Canada, I don't think
> we have TIPS here but then again that is not my
> area of expertise



Sure you do. They're called 'Real Return Bonds'. I've never looked into them so I don't have much info except they exist. Try Google.

 

[DeadCat]

"But i was thinking, the governement will always try to stabalize it around what they think is optimal, usually around 2%, thus meaning that longer than 1 year a forecast wouldn't make sense."

Quite the opposite. As the big MF himself said: 'Inflation is always and everywhere a monetary phenomenon'. The kind of monetary tools we have at our disposal are generally considered to take something in the region of 12-18months to have an effect on inflation - hence inflation forcasts further than one year out are quite important.

As morty says, the best predicor is the relative yield spread between a nominal and a real bond of the same credit quality. The current trend for liability matching may distort this a little - certainly in the UK where pension funds are scrambling to fill their boots with long-term index-linked bonds.

 

[imp]

At the risk of deviating from this thread a bit, I'm surprised that there isn't a lot more issuance of index-linked bonds in the UK not just from governments but also from corporates, banks or other structures set up by IBs with other assets as collateral (real estate portfolios, loan portfolios, etc...).

Perhaps someone on the debt side of things could explain why this is so (or correct me if I'm wrong).

 

[Sims]

ok, forgive my lack of knowledge on this,
right now the spread between the 5 yr tresury bond and the 5yr real return bond is 2.3% , does this mean that the forecast for inflation for the next 5 years is approx 2.3% / year?

 

[abacus]

2.3% is the market view, but it must have taken into account the view of the Canadian Central Bank. Within US, Fed has an unstated policy of keeping inflation under 2%.