This paper investigates the information content of the term structure of inflation risks and its usefulness for understanding inflation dynamics. Using prices of traded zero-coupon inflation caps and floors, we develop a robust non-parametric methodology, combined with a Student’s t-copula, to estimate spot and forward risk-neutral densities at short-, medium-, and long-term horizons, i.e., long-horizon risks are identified from liquid instruments alone, at daily frequency, without forward-starting contracts. Focusing on the euro area over 2009-2026, we show that the term structure of inflation risks provides valuable information about the persistence of inflation shocks and the degree to which changes in the inflation outlook become embedded at longer horizons. We also show that there is marked heterogeneity in the macroeconomic and financial conditions associated to inflation risks across horizons: short- and medium-term risks are mainly associated with current inflation, confidence indicators, commodity prices, and near-term macroeconomic risks, whereas long-term risks are more strongly related to monetary and financial conditions. These findings highlight the importance of analysing the entire term structure of inflation risks rather than relying on a single maturity.
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