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13 posts on "Inflation expectations"
July 27, 2011

Inflation Expectations and Behavior: Do Survey Respondents Act on Their Beliefs?

Surveys of consumers’ inflation expectations are now a key component of monetary policy. To date, however, little work has been done on 1) whether individual consumers act on their beliefs about future inflation, and 2) whether the inflation expectations elicited by these surveys are actually informative about the respondents’ beliefs. In this post, we report on a new study by Armantier, Bruine de Bruin, Topa, van der Klaauw, and Zafar (2010) that investigates these two issues by comparing consumers’ survey-based inflation expectations with their behavior in a financially incentivized experiment. We find that the decisions of survey respondents are generally consistent with their stated inflation beliefs.

May 31, 2011

Did Unconventional Policy Responses to the Crisis Work? Evidence from a Cross-Country Analysis

The 2008-09 global recession produced a significant loss of output and a deflationary scare in many countries. The depth, scale, and duration of the crisis triggered monetary and fiscal policy actions that were “unconventional” in terms of their size and scope, leading to an ongoing debate over the role that these policy responses played in the stabilization process. How and to what extent were these policies effective? In this post, we examine cross-country experiences and find evidence consistent with the idea that the policies contributed to the stabilization process through their effect on expectations of output and inflation.

May 16, 2011

Are Rising Commodity Prices Unanchoring Inflation Expectations?

The U.S. inflation outlook is the focus of considerable discussion in business and central banking circles. As shown in the chart below, headline inflation measured as a year-to-year percentage change declined over the first half of 2010, leveled off in the second half of the year, and has been rising recently—driven largely by higher commodity prices. An important question is whether this recent increase is likely to be transitory or the beginning of a more sustained rise in headline inflation. In this post, we examine data from the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters (SPF) and discuss how the survey’s unique features and rich information on inflation expectations can shed light on this question as well as offer insight into the inflation outlook that is not available from other survey instruments. While inflation has indeed increased recently, our analysis suggests that inflation expectations are not presently at risk of becoming “unanchored,” or showing a greater concern over higher future inflation.

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