Cost to Protect Against U.S. Deflation Hits 16-Month Low: Chart

The premium on options that pay out if the U.S. consumer price index is lower 10 years from now fell Tuesday to the cheapest level since December 2014. Such reduced risks of deflation have helped boost the 10-year breakeven inflation rate derived from Treasury Inflation-Protected Securities to the highest level since August, a welcome sign for Federal Reserve policy makers meeting Tuesday and Wednesday in Washington to discuss their next move. After their last meeting in March, officials cited low market-based measures of inflation compensation like breakevens as a potential cause for concern.

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