Working Paper Series no. 433: Market-implied inflation and growth rates adversely affected by the Brent

Abstract

The inflation and the real yield component deduced from inflation-linked and nominal bond prices are adversely affected by two market effects: price distortions due to certain market-related events and oil price movements. Their underlying time-correlation without those effects is stable and positive. Market data analysis carried out on the world’s major bond markets gives valuable new insight into the long-debated relationship between inflation and growth prospects.

Gilbert Cette and Marielle de Jong
April 2013

Classification JEL : E43, G15

Keywords : inflation-linked bonds, breakeven inflation, Fisher hypothesis, Brent