The present paper examines, for the Brazilian case, if implied inflation extracted from fixed income securities is an unbiased estimator of consumer inflation, measured by the IPCA. Our estimates suggest that break-even inflation rates - or just BEIRs - are informative about future inflation, especially for the maturity of three months. The main innovation of our work, however, is the method used for estimation, allowing us to conclude that inflation risk, for some of the maturities considered, varies over time and is not irrelevant from the economic standpoint. We also compared the inflation forecasts obtained from BEIRs with the ones extracted from VAR models used by Central Bank and estimates of Focus Report's Top5s. The forecasts performed with BEIRs showed greater accuracy than those extracted from VAR models, though less precision than those generated by the Top5s.
break-even inflation rate; inflation forecasting; inflation risk premium
