Inflation Due to a recession, expected inflation this year is only $3\mathrm{.}25\%.$ However, the inflation rate in Year $2$ and thereafter is expected to be constant at some level above $3\mathrm{.}25\%.$ 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 $1\mathrm{.}5\%,$ what inflation rate is expected after Year $1?$