Using 5 year ahead inflation expectations from the Michigan survey, not so much erosion in Trump 1.0. Trump 2.0 so far is another story.

Figure 1: Bordo-Siklos measure of Inflation Credibility (blue). Higher values indicate less credibility; assumes CPI target consistent with 2% PCE deflator target is 2.45%. Light orange highlight indicates Trump Administrations. Source: Michigan Survey and author’s calculations.

In a previous post, I used the NY Fed’s measure to calculate the Bordo-Siklos index; at the moment only the January observation is available for that dataset.

And as an indicator of the tails, here’s the 75 percentile expectation, minus 2.45 percentage points.

Figure 2: 75%ile of expected 5 year inflation minus 2.45% (blue). Higher values indicate less credibility; assumes CPI target consistent with 2% PCE deflator target is 2.45%. Light orange highlight indicates Trump Administrations. Source: Michigan Survey and author’s calculations.

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