Euro area longer-term inflation expectations revisited

David Byrne and Zivile Zekaite

No 12/EL/19, Economic Letters from Central Bank of Ireland

Abstract: This Letter examines recent dynamics in ination expectations, which are an important determinant of actual ination, as they impact economic decisions, such as households’ spending decisions and rms’ pricing plans. It is therefore important that expectations are well-anchored and that longer-term expectations are at levels consistent with the Eurosystem’s ination objective and insensitive to shocks to the economy or prices. We show some evidence for weaker anchoring since 2013 through increased sensitivity to shocks. As both the ination risk premium and the expected level of ination have declined more recently, monetary policymakers should continue monitoring developments in ination expectations closely.

Date: 2019-10
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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