U.S. Inflation Expectations — 10-Year Breakeven Inflation Rate: long-run anchoring with modest risk pricing
The 10-year breakeven inflation rate is a market-based estimate of average inflation over the next decade, inferred from the spread between nominal Treasury yields and inflation-protected securities (TIPS). It is commonly used as a long-horizon signal of inflation credibility, long-run risk pricing, and the degree to which investors expect inflation to remain consistent with a stable nominal regime.
Over 2025 through early 2026, the series remained remarkably stable, oscillating mostly between ~2.2% and ~2.5%. The absence of sustained upside drift suggests that long-run inflation expectations remained broadly anchored, even as short-run inflation data and policy-rate expectations fluctuated over the period.
Recent dynamics
Early 2025 began in the mid-2% range, followed by intermittent moves toward ~2.4%–2.5%. These episodes are consistent with periods in which inflation risk was repriced upward without implying a structural break in long-run expectations. Rather than a persistent re-anchoring higher, the data show a pattern of temporary risk premia adjustments that later retraced.
The second half of 2025 shows a gradual cooling in the series toward ~2.2%–2.3%, followed by a modest firming into early 2026. This profile is consistent with a regime where long-run inflation credibility remains intact, while markets continue to price a non-zero probability of inflation persistence above pre-pandemic norms.
Interpretation and credibility signal
The most important signal in the 10-year breakeven is stability. Even when shorter-horizon inflation measures move materially, the long-run breakeven tends to react less, reflecting that investors do not expect temporary inflation shocks to permanently alter the nominal regime.
At the same time, the level being modestly above 2% implies that long-run inflation risk has not returned to the ultra-low, highly predictable environment that prevailed for much of the 2010s. The market appears to price inflation outcomes as more uncertain and slightly more persistent, without signaling a loss of control.
Interaction with rates and term premia
Because nominal yields embed both real-rate and inflation components, a stable 10-year breakeven can coexist with significant variation in long-term yields. In this configuration, changes in long-term rates are more likely to be driven by real yields and term premia dynamics than by shifts in long-run inflation expectations.
This distinction matters for macro interpretation: when long-term yields rise while the 10-year breakeven remains contained, financial conditions can tighten materially without markets pricing an unanchoring of inflation.
Conclusion
The 10-year breakeven inflation rate indicates a regime of anchored long-run expectations with modest and cyclical repricing of inflation risk. Markets appear to view inflation as more uncertain than in the pre-pandemic decade, but not on a path toward instability.
The dominant takeaway is credibility: long-run inflation expectations remain contained, suggesting that the expected inflation regime over the next decade is closer to normalization than to a renewed inflationary era.