Understanding the Distribution of Inflation Expectations

Julie Bennett, Neville Francis, Brooke Hathhorn, Jonghyuck Lim and Michael Owyang

Review, 2026, vol. 108, issue 10, 19 pages

Abstract: Inflation expectations are central to monetary policy but are often summarized by a single statistic such as the mean or median forecast. This article argues for a distributional view in which the full cross-sectional distribution of beliefs is the relevant object. We first organize the literature around the main distributional features of inflation expectations: the level of expected inflation, disagreement across agents, subjective uncertainty within agents, skewness, and tail behavior. The literature consistently documents large and time-varying disagreement, systematic demographic heterogeneity, non-Gaussian distributions with right skewness and fat tails, and a weak relationship between disagreement and individual uncertainty. We then discuss how household and firm surveys, professional forecasts, market-based indicators, and model-based measures map into these distributional objects, emphasizing that they are distinct measurement technologies tied to different populations and information environments. Finally, a brief empirical illustration shows how standard macroeconomic tools can be adapted to track changes in the shape of the expectations distribution and express those changes as mass shifts across economically meaningful inflation regions, such as deflation, near-target inflation, and high inflation. The policy implication is that central banks should monitor distributional statistics, not only central tendencies, and should interpret different expectation measures as complementary rather than interchangeable indicators.

Keywords: inflation expectations; economic statistics; distributional statistics; economic indicators (search for similar items in EconPapers)
JEL-codes: D83 D84 E32 E52 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlrv:103720

DOI: 10.20955/r.2026.10

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