Let me now turn to some of the measurement issues. First, inflation-indexed bond is a market based measure of inflation expectations. It provides protection against inflation. While a conventional bond pays its coupon on a fixed principal amount, the inflation linked bonds provide coupon on inflation-adjusted principal amount.
In the recent years, sovereign inflation-indexed bonds have become available in a number of countries and have provided a new instrument for use in retirement saving. The differential yields between ordinary and inflation-indexed government bonds of similar maturity provide an indication of inflation expectations. Second, inflation expectations can also be derived from the yield curve of ordinary bonds of different maturities.