Medium-term versus short-term inflation expectations in the euro area
In this paper, Stanisławska and Paloviita use the ECB Consumer Expectations Survey, a new monthly online survey, to analyze how consumers revise medium-term inflation expectations. Their analysis indicates that:
- Medium-term inflation expectations of euro area consumers clearly adjust to changes in short-term inflation expectations and, to a lesser extent, to changes in inflation perceptions. For example, COVID-19 contributed to an increase in consumers’ inflation expectations even though at the time of the survey inflation hadn’t picked-up;
- Consumers who have higher trust in the central bank adjust their inflation views to transitory economic developments to a lesser degree than consumers with lower trust.
Medium- vs. short-term consumer inflation expectations: evidence from a new euro area survey
Authors: Ewa Stanisławska, Maritta Paloviita
From: Bank of Finland, Narodowy Bank Polski
How did the old strategy fare?
In this paper, Bottone et al. use data from the quarterly Survey on Inflation and Growth Expectations, run by the Bank of Italy on a sample of about 1,000 manufacturing, service and construction firms, to study how awareness of the formulation of the ECB’s inflation aim – “below, but close to, 2%” – shaped the inflation expectations of Italian firms. Their findings include:
- In the recent period of low inflation, awareness of the ECB’s targeting strategy stabilized firms’ inflation expectations at higher levels, closer to its target;
- The majority of firms had difficulty in interpreting the “below, but close to” formulation.
Inflation expectations and the ECB’s perceived inflation objective: novel evidence from firm-level data
Authors: Marco Bottone, Alex Tagliabracci, Giordano Zevi
From: Bank of Italy
