A recent study suggests balance sheet runoff could boost the level of the term premium on the 10-year Treasury yield by about 40 basis points over the first few years.15 Typical rules of thumb suggest that such an increase in term premiums would imply a decrease in the short-run neutral rate of interest.
It potentially can deliver signals on the probabilities of various inflation outcomes, as priced by investors, but the liquidity and segmentation of inflation options remain a significant challenge. Let me now say a few words on how we use signals extracted from markets for inflation protection for our daily analysis (see slide 4).