MNI BRIEF: Fed's Favored Inflation Expectations Index Ticks Up

One of the Fed's preferred gauges for inflation expectations has ticked up closer to 2%, a new release Friday showed, but remains below levels Fed officials have said is necessary to cause the central bank to adjust its monetary policy tools.

The Index of Common Inflation Expectations was updated with data through December and shows that inflation expectations came in at 1.96%, after falling to 1.93% in March 2020 and drifting lower over previous years. The CIE index - a measure of 21 varying inflation expectation indicators - is expected to be updated quarterly with the Q1 release expected April 16 at noon ET.

Outlining the CIE's relevance, Fed vice chair Richard Clarida said in November that "if at the time of liftoff the CIE index is below its pre-ELB level, then my desired pace of policy normalization post-liftoff to return inflation to 2 percent—as well as the projected pace of return to 2 percent inflation—would be somewhat slower than if the CIE index at the time of liftoff is equal to its pre-ELB level."