Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of data, technology, and market infrastructure, today announced that ICE Benchmark Administration Limited (IBA) is introducing full calendar year inflation expectations to the ICE U.S. Dollar Inflation Expectations Index Family.
Inflation expectations are crucial to financial markets and to policy makers. In March 2022, IBA created the ICE U.S. Dollar Inflation Expectations Index Family to provide the market with an easy to access tool to measure expectations for future inflation.
Following an initial testing period and based on feedback received to date, IBA is expanding the Index Family to introduce inflation expectations for full calendar years, from December one year to December the next. Rates will be published for both the current and following years. In addition, IBA has revised the tenor periods for one year and forward rates to start as of the reference date of the latest Consumer Price Index (CPI) published by the U.S. Bureau of Labor Statistics.
The revised model was effective from July 13, 2022, with the first publication of the revised figures on July 14.
The historical test results are published here and reflect the new tenor definitions, which currently include:
- Expected inflation over the current calendar year measuring the projected increase in CPI from Dec 2021 to Dec 2022
- Expected inflation over the next calendar year from Dec 2022 to Dec 2023
- Expected inflation over one year forward (12 months from latest CPI) from June 2022 to June 2023
- Expected longer term inflation over five years, one year forward starting in June of 2023
- Expected longer term inflation over five years, five years forward starting in June of 2027
IBA calculates daily, indicative index settings from price/yield data from U.S. Treasury Inflation Protected Securities (TIPS), Treasury Bills, Notes and Bonds, and the inflation-linked swaps markets, which together represent amongst the deepest and most liquid inflation-linked markets. IBA then creates a blended inflation curve from which forward, implied inflation expectations can be calculated.
The Index values under the revised model are being published at approximately 8am New York time here for an initial feedback period. IBA is seeking feedback from stakeholders on the Inflation Expectations Index Family methodology and outputs and on the potential for the Inflation Expectations Index Family to become a benchmark for use in financial contracts. Feedback should be sent to IBA@ice.com.
Please note that during the feedback period the settings are being published solely for information and feedback purposes and are not intended for, and IBA expressly prohibits their use for, any other purpose, including as a reference, index or benchmark in financial contracts, instruments, or to measure the performance of investment funds.
