for consumer price index ( cpi ) inflation from the survey of professional forecasters ticked up in february, this measure remained at essentially the same value that has prevailed since 1998. as for inflation compensation derived from spreads between yields on nominal and inflationindexed treasury securities ( known as treasury inflation - protected securities, or tips ), the implied rate of inflation compensation from five years ahead to ten years ahead ( the socalled five - to - ten - year - forward rate ) has risen somewhat since the beginning of the year. does this rise in forward inflation compensation indicate that long - run inflation expectations have risen by a similar amount? my best guess is that much of the rise in inflation compensation reflects other factors. to begin, recall that inflation compensation measured by using tips yields is not the same thing as inflation expectations. rather, movements in inflation compensation reflect not only changes in inflation expectations, but also changes in an inflation risk premium and in the relative liquidity of tips and similar maturity nominal treasuries. 3 to see that these components are distinct, recall that during the period of heightened concerns about deflation in 2003 and 2004, forward inflation compensation rose substantially to an unusually high level amid concerns about an unwelcome fall in inflation ; that earlier episode, in particular, underscores the fact that we must be careful in using the forward rates of inflation compensation as a gauge of long - run inflation expectations. to see this distinction another way, consider a scenario in which inflation uncertainty increased but inflation expectations for additional background, see gurkaynak, sack, and wright ( 2008 ). they discuss the decomposition of inflation compensation into these distinct components and argue that far - forward rates of inflation compensation are too volatile to be pure measures of long - run inflation expectations. did not. in that case, the midpoint of inflation expectations would remain the same, but the range around the midpoint would increase. turning specifically to the recent experience, consider the sequence of one - year - forward rates of inflation compensation – that is, decompose ten - year inflation compensation into a sequence of one - year - forward rates. the one - year - forward rate ending about five years from now has moved up, but the forward rate ending in ten years has climbed more than twice as much. this pattern suggests an important role for factors other than rising long - run inflation expectations in explaining recent movements in inflation compensation as one might suppose that any tendency toward higher inflation would be expected to show through within five

i would note the possibility of a feedback loop between financial market disruptions and deterioration in the real economy that i have emphasized in previous speeches ( mishkin, 2008a, 2008b ). because economic downturns typically result in even greater uncertainty about asset values, such episodes may trigger an adverse feedback loop whereby financial disruptions cause investment and consumer spending to decline, which, in turn, causes economic activity to contract. such a contraction then increases uncertainty about the value of assets, and, as a result, the financial disruption worsens. this development then causes economic activity to contract further in a perverse cycle. inflation and inflation dynamics let me turn now to inflation and inflation dynamics. over the twelve months ended in january, the price index for total personal consumption expenditures ( pce ) rose 3. 7 percent, up from 2. 1 percent during the comparable period twelve months earlier. recently, headline inflation has been pushed higher by sizable increases in food and energy prices ; crude oil prices have surged, and food prices have risen significantly, reflecting strong global demand in general as well as hefty demand in particular for corn for use in ethanol production. even excluding food and energy, recent readings on inflation also have been elevated, although over the past year core pce prices decelerated a touch from 2. 4 percent to 2. 2 percent. the recent observations on core inflation suggest that higher energy costs and the lower exchange value of the dollar may have been sources of upward pressure on core inflation. however, the recent bump up in inflation also likely reflected a reversal of unusually low readings earlier last year for apparel, prescription drugs, and so - called nonmarket items in the index, and the contribution of these items to core inflation is likely to wane. in my view, long - run inflation dynamics are influenced importantly both by prospects for the future balance of aggregate supply and demand, as well as by longer - run inflation expectations ( mishkin, 2007a ). by a range of measures, longer - run inflation expectations appear to have remained reasonably well contained even as recent readings on headline inflation have been elevated. the median expectation of inflation five to ten years ahead in the reuters / university of michigan survey stands in the middle of the range that has been evident over the past couple of years, although the expectation for year - ahead inflation from this same survey has moved up recently, presumably in response to the higher rates of actual inflation. in addition, although the measure of long - run expectations