Due to a recession, expected inflation this year is only $2\mathrm{.}75\%.$ However, the inflation rate in Year $2$ and thereafter is expected to be constant at some level above $2\mathrm{.}75\%.$ Assume that the expectations theory holds and the real risk$-$free rate $($r$*)$ is $2\mathrm{.}5\%.$ If the yield on $3-$year Treasury bonds equals the $1-$year yield plus $0\mathrm{.}5\%,$ what inflation rate is expected after Year $1?$ Round your answer to two decimal places.

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