Households' Preferences Over Inflation and Monetary Policy Tradeoffs
Damjan Pfajfar and
Fabian Winkler
No 25-12, Working Papers from Federal Reserve Bank of Cleveland
Abstract:
We document novel facts about US household preferences over inflation and monetary policy tradeoffs. Many households were attentive to news about monetary policy and to interest rates in 2023. The median household perceives the Federal Reserve's inflation objective to be 3 percent, but would prefer it to be lower. Quantifying the tradeoff between inflation and unemployment, we find an average acceptable sacrifice ratio of 0.6, implying that households are likely to find disinflation costly. Average preferences are well represented by a non-linear loss function with near equal weights on inflation and unemployment. These preferences also exhibit sizable demographic heterogeneity.
Keywords: household survey; attention; inflation target; sacrifice ratio; dual mandate (search for similar items in EconPapers)
JEL-codes: D12 E52 E58 (search for similar items in EconPapers)
Pages: 55
Date: 2025-04-24
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://doi.org/10.26509/frbc-wp-202512 Persistent link (text/html)
https://www.clevelandfed.org/-/media/project/cleve ... pers/2025/wp2512.pdf Full text (application/pdf)
Related works:
Working Paper: Households' Preferences Over Inflation and Monetary Policy Tradeoffs (2024) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:99898
Ordering information: This working paper can be ordered from
DOI: 10.26509/frbc-wp-202512
Access Statistics for this paper
More papers in Working Papers from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().