Inflation breakevens
TIPS (inflation-protected Treasuries) pay a real yield; nominal Treasuries pay a nominal one. The difference between them — the breakeven — is the inflation rate the bond market is pricing in. A 10-year breakeven of 2.3% means markets expect 2.3% average inflation over the decade.
What it's actually measuring
Breakevens aren't a pure inflation forecast — they bundle inflation expectations with an inflation-risk premium and liquidity effects. In crisis moments they can under- or over-shoot: 2008 breakevens collapsed below zero on deflation panic even as the Fed was certain inflation would return.
Why the panel cares
Breakevens aren't a recession signal directly, but they shape the context: a curve inverting *because* breakevens are falling (recession fear) means something different from one inverting on rate expectations alone. And they validate the policy stance: if breakevens are rising while the Fed hikes, tightening is failing — the curve signal is about the consequences.