Inflation Preferences

Hassan Afrouzi, Alexander Dietrich, Kristian Myrseth, Romanos Priftis and Raphael Schoenle

No 19006, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We document novel survey-based facts on preferred long-run inflation rates among U.S. consumers. Consumers on average prefer a 0.20% annual inflation rate, considerably below the Federal Reserve’s 2% target. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on economic models---describing how inflation lowers the real value of wages as well as money holdings---affect inflation preferences. While our results can inform the design of central bank communication on inflation targets, they also raise questions about the alignment between such targets and consumer preferences.

Keywords: Household; expectations (search for similar items in EconPapers)
JEL-codes: C83 (search for similar items in EconPapers)
Date: 2024-04
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Working Paper: Inflation preferences (2024)
Working Paper: Inflation Preferences (2024)
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