5-Year Breakeven Inflation Rate
Inflation · Federal Reserve Bank of St. Louis (FRED) · Daily · T5YIE
What it is
The 5-year breakeven inflation rate is the 5-year nominal Treasury yield minus the 5-year TIPS real yield. Because TIPS principal is indexed to CPI-U, the gap between the two yields is the average annual CPI inflation rate at which an investor would earn the same return from either bond over the next five years. The daily series (FRED: T5YIE) is computed from Treasury constant-maturity yields and is the most widely used market-based gauge of medium-term U.S. inflation expectations.
Why it matters
The 5-year breakeven spans the horizon over which Federal Reserve policy is expected to bring inflation back to target, so it reacts directly to CPI releases, energy prices and changes in the expected policy path. It is read alongside the 10-year breakeven and the 5y5y forward: a rising 5-year with a stable 5y5y points to near-term inflation pressure, while both rising together signals concern about longer-run anchoring. Readings include a TIPS liquidity premium and an inflation risk premium, so they are not a pure forecast.
Public research record
Research framework · page evidenceLatest completed assessment: 5-Year Breakeven Inflation Rate
The 5-year breakeven spans the horizon over which Federal Reserve policy is expected to bring inflation back to target, so it reacts directly to CPI releases, energy prices and changes in the expected policy path. It is read alongside the 10-year breakeven and the 5y5y forward: a rising 5-year with a stable 5y5y points to near-term inflation pressure, while both rising together signals concern about longer-run anchoring. Readings include a TIPS liquidity premium and an inflation risk premium, so they are not a pure forecast.
| Type | Claim | Scope |
|---|---|---|
| Release fact | The 5-year breakeven inflation rate is the 5-year nominal Treasury yield minus the 5-year TIPS real yield. Because TIPS principal is indexed to CPI-U, the gap between the two yields is the average annual CPI inflation rate at which an investor would earn the same return from either bond over the next five years. The daily series (FRED: T5YIE) is computed from Treasury constant-maturity yields and is the most widely used market-based gauge of medium-term U.S. inflation expectations. | Daily · % |
| Interpretation | Market-implied inflation expectations rising; risk of un-anchoring. | Higher-reading interpretation |
| Interpretation | Inflation expectations cooling; supports Fed cutting cycle. | Lower-reading interpretation |
Countercase, invalidators, and sources
A single indicator does not identify causality; confirm the move against related funding, reserve, market, and asset data.
- · The next observation reverses the move.
- · Related indicators do not confirm the interpretation.
Do this in Market Ontology
- Treasury yield curve analysis from released dataTrack the US Treasury yield curve from FRED: 2s10s and 3m10y spreads, inversion history and what changes in slope have preceded.
- Track inflation from CPI, PCE and market breakevensMonitor US inflation from released data: CPI and core CPI, PCE, and 5- and 10-year breakevens, with what the next release needs to show.
- Track the US labor market from released dataFollow payrolls, unemployment, jobless claims and wage growth from FRED, with the Sahm rule reading and trend versus the prior year.
- Central bank policy analysisRead Federal Reserve policy from the funds rate, real rates and released statements, and compare the stance with inflation and labor data.
How to read prints
| When it rises | Market-implied inflation expectations rising; risk of un-anchoring. |
| When it falls | Inflation expectations cooling; supports Fed cutting cycle. |
Frequently asked
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What level matters?⌄
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What is the 5y5y forward breakeven?⌄
How is this different from survey-based expectations?⌄
Tracked live in Inflation System
See it live
5-Year Breakeven Inflation Rate is tracked live in the inflation, breakevens and real yields module of the public terminal. No account required.
| Source | Federal Reserve Bank of St. Louis (FRED) |
| Frequency | Daily |
| Category | Inflation |
| FRED Series | T5YIE |
| Unit | % |
| Related Module | Inflation System |