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We use several U.S. and euro-area surveys of professional forecasters to estimate a dynamic factormodel of inflation featuring time-varying uncertainty. We obtain survey-consistent distributions of future inflation at any horizon, both in the U.S. and the euro area. Equipped with this model, we propose a novel measure of the anchoring of inflation expectations that accounts for inflation uncertainty. Our results suggest that following the Great Recession, inflation anchoring improved in the United States, while mild de-anchoring occurred in the euro area. As of our sample end, both areas appear to be almost equally anchored.

Fisher hypothesis is universally accepted as an integral portion of monetary theory and practice, and yet the empirical evidence confirming a full Fisher effect remains scarce and the relationship has been challenged on several theoretical grounds referred to as ‘puzzles’. Our paper suggests the use of continuous wavelet transforms as a unified analytical framework for confronting the different Fisher puzzles in a harmonious way. Taking South Africa as a case study, we focus on the inflation targeting period of 2002:01–2021:02 and use signal-image conversion tools such as wavelet power spectrum, wavelet coherence spectrum and phase-difference dynamics to extract signal features of nominal interest rates and inflation expectations and further explore their dynamic synchronization across a time–frequency plane/domain. Three unique findings emerge from our study. Firstly, across a time domain a full Fisher effect only holds in the pre-financial crisis period. Secondly, across the frequency spectrums, higher frequency oscillations gradually lose relevance to lower frequency oscillations providing evidence of volatility transfer in the Fisher effect. Lastly, the phase-dynamics indicate a consistent positive synchronization throughout the sample period which is line with the traditional Fisher effect. Overall, these findings highlight the success of the South African Reserve Bank in using inflation targeting to steer the expectations of economic agents under the tenures of the last three governors and provide important lessons for other Central banks.

This paper investigates the heterogeneity of inflation expectations among households, firms, and professionals across 14 economies. Using Bayesian model averaging and panel data regressions, we identify key determinants of inflation expectations, assess their stability over time, and evaluate their persistence. Our findings reveal that households and firms rely heavily on past expectations and year-on-year changes in economic variables, whereas professionals are more responsive to monetary policy indicators. The inflation news index emerges as a crucial determinant, especially during high-inflation periods, highlighting the role of media in expectation formation. We find that inflation expectations became more backward-looking during the inflationary period 2022. Additionally, while CPI inflation significantly influences firms and professionals, exchange rates and oil prices appear insignificant.

In this paper, we study how inflation is viewed by the general population of New Zealand. Based on unique representative survey data collected in 2016 and using descriptive statistics and multivariate regressions, we explore various aspects of how laypersons perceive inflation and form inflation expectations. We focus on how an individual’s economic situation, information search and interest in inflation, economic knowledge, and attitudes and values are related to inflation perception and expectation, as well as the individual’s reaction to them. We interpret our findings as a clear indication that laypersons’ knowledge about inflation is much better described by the imperfect information view prevailing in social psychology than by the rational actor view typically assumed in economics.

Inflation expectations are critical in monetary economics. It could affect the policy outcome as economic agents’ responses to a monetary policy partially depend on the economic expectations. This systematic literature review discusses the impact of media on various aspects of inflation expectation, especially inflation forecasts and their errors, updating behaviour, and disagreement in inflation expectations. Using the PRISMA procedure on two academic databases from 2000 to February 2023, 65 journal articles were analysed. After discussing the research framework and research characteristics, the analysed papers are discussed from three perspectives: methodology, media measurement, and topic coverage. The findings suggest that these papers applied quantitative and qualitative analysis techniques, especially the former. Besides, different media sources have been collected, mostly from newspapers and surveys. Different data processing steps are applied to extract the related information for estimation from these sources. Next, the paper presented could be grouped into theoretical formation and empirical evidence of different media perspectives’ influence on inflation expectation. The empirical studies have offered mixed empirical evidence on the implications of media. This paper ends with six recommendations for future research.

This study examines asymmetry in loss functions of consumer’s perceived and expected consumer price index inflation in Japan. We find strong upward bias of perceived and one-year-ahead inflation expectations, and evidence against rationality under symmetric loss functions. We find considerable evidence of asymmetric loss in perceived and expected inflation and support for rationality upon assuming asymmetric loss functions. Strong biases in consumers’ perceived and expected inflation result from asymmetric loss rather than irrationality. Using epidemiology models, we find that expected inflation is strongly related to perceived inflation with no significant role for actual inflation. Moreover, consumers gradually incorporate central bank forecasts, but not professional forecasts, into their inflation expectations. This indicates that asymmetric loss in perceived inflation is important in forming inflation expectation. The central bank should take into consideration the asymmetric loss in consumers’ inflation expectations and the close relationship between the inflation expectations and perceived inflation in formulating monetary policy.

Purpose The Inflation Expectations Survey of Households, conducted by the Reserve Bank of India (RBI), indicates that there is considerable disparity in inflation expectations across cities in India. The purpose of this paper is to investigate why different cities exhibit heterogeneous inflation expectations despite coming under a central monetary policy umbrella. Design/methodology/approach First, the correspondence between city-level inflation expectations and city-specific economic characteristics is mapped. Second, how the disagreement in inflation expectations across cities, measured by dispersion, behaves over the business cycle is investigated. Finally, using seemingly unrelated regression technique, the economic factors that play a role in explaining inflation expectations heterogeneity across cities are estimated. Findings Cities with higher economic activity and cost of living have higher inflation expectations. Disagreement across cities regarding inflation expectations rise with an increase in output gap and inflation. Information friction plays an important role in explaining the disparity in inflation expectations across cities, and the effects of macro-level factors vary across cities, thereby accentuating expectations dispersion. Research limitations/implications Monetary policy-related communication by the RBI (toward the general public) should increase in order to address information friction, which, in turn, would temper down the extent of inflation expectations heterogeneity across cities in India. Originality/value This is a novel application of the data from the monetary policy perspective. Heterogeneity in inflation expectations across cities or regions is an unexplored area. The use of nightlights as a proxy for city-level economic activity in India (in absence of data on city-level income) is another original contribution.

We use a unique design feature of a survey of Italian firms to study the causal effect of inflation expectations on firms’ economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent inflation whereas other firms are not. This information treatment generates exogenous variation in inflation expectations. We find that higher inflation expectations on the part of firms leads them to raise their prices, increase demand for credit, and reduce their employment and capital. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.

This article examines the relationship between consumer expectations and macro variables. The research covers five EU member states: Croatia, the Czech Republic, Hungary, Poland, and Romania in the period from 2011 to 2015. Its aim is to find long-run dependence of expectations and financial and real sphere variables in the post-crisis era. No previous studies for this sample and time span exist: this paper contributes to the strand of the literature detecting formation patterns of expectations. VAR/VEC models are estimated in order to trace impulse response to expectations. Five different stories have been found about expectation formation for each economy.

Abstract—The article presents the results of a survey of manufacturing enterprises conducted to study the nature of inflation expectations of Russian companies. The survey data show a high heterogeneity and weak anchoring of inflation expectations (i.e., their instability in the case of short-term inflation fluctuations), which indicates the continuation of adaptation processes in the Russian economy in the transition to inflation targeting policies. In this situation, an important task for the central bank is to strengthen the impact of monetary policy measures on the process of generating inflation expectations of enterprises.