{"id":271563,"date":"2025-02-22T23:56:08","date_gmt":"2025-02-22T23:56:08","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2025\/02\/22\/a-fed-inflation-credibility-index-under-trump\/"},"modified":"2025-06-25T17:09:17","modified_gmt":"2025-06-25T17:09:17","slug":"a-fed-inflation-credibility-index-under-trump","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2025\/02\/22\/a-fed-inflation-credibility-index-under-trump\/","title":{"rendered":"A Fed Inflation Credibility Index under Trump"},"content":{"rendered":"

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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.<\/p>\n

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Figure 1:<\/strong> Bordo-Siklos<\/a> 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\u2019s calculations.<\/em><\/p>\n

In a previous post<\/a>, I used the NY Fed\u2019s measure to calculate the Bordo-Siklos index; at the moment only the January observation is available for that dataset.<\/p>\n

And as an indicator of the tails, here\u2019s the 75 percentile expectation, minus 2.45 percentage points.<\/p>\n

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Figure 2:<\/strong> 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\u2019s calculations.<\/em><\/p>\n

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