Consumers’ Perspectives on the Recent Movements in Inflation

Felix Aidala, Olivier Armantier, Fatima Boumahdi, Gizem Kosar, Devon Lall, Jason Somerville, Giorgio Topa and Wilbert van der Klaauw
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Jason Somerville: https://www.newyorkfed.org/research/economists/somerville

No 20230817, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Inflation in the U.S. has experienced unusually large movements in the last few years, starting with a steep rise between the spring of 2021 and June 2022, followed by a relatively rapid decline over the past twelve months. This marks a stark departure from an extended period of low and stable inflation. Economists and policymakers have expressed differing views about which factors contributed to these large movements (as reported in the media here, here, here, and here), leading to fierce debates in policy circles, academic journals, and the press. We know little, however, about the consumer’s perspective on what caused these sudden movements in inflation. In this post, we explore this question using a special module of the Federal Reserve Bank of New York’s Survey of Consumer Expectations (SCE) in which consumers were asked what they think contributed to the recent movements in inflation. We find that consumers think supply-side issues were the most important factor behind the 2021-22 inflation surge, while they regard Federal Reserve policies as the most important factor behind the recent and expected future decline in inflation.

Keywords: expectations; inflation; Fed policy; supply chain; pandemic; monetary policy (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Date: 2023-08-17
New Economics Papers: this item is included in nep-ban and nep-mon
Note: Editors Note: The title of this post has been changed from the original. August 17, 2023, 10:35 a.m.
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