The Anchoring of US Inflation Expectations Since 2012

Kristoph Naggert, Robert Rich and Joseph Tracy

Economic Commentary, 2023, vol. 2023, issue 11, 7

Abstract: The stabilization, or anchoring, of inflation expectations at a target can help a central bank meet its goals. This paper develops a measure of expectations’ anchoring that combines the deviation of a consensus forecast from an inflation target with forecaster disagreement. We apply the measure to survey-based forecasts of PCE price inflation at medium- and longer-run horizons. Following the FOMC’s 2012 announcement of a 2 percent inflation target, the anchoring of both forecast series steadily improved through 2020:Q4. Recently, while longer-run expectations have remained well-anchored, the anchoring of medium-run expectations weakened significantly during the pandemic before strengthening in 2023:Q1.

Date: 2023
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DOI: 10.26509/frbc-ec-202311

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