TIPS Derived Expected Inflation: About 2%

The spread between nominal 10-year treasuries (data) and 10-year TIPS (data) has increased to above 2% this week, up from almost 0% at the beginning of the year. But the current 211 basis point spread is still below the 250 basis point average during 2004, 2005, 2006, 2007 and the first half of 2008.  This measure of expected inflation (about 2%) is consistent with the market consensus inflation forecast from the latest WSJ survey of about 2% through the end of next year.