Out of Bounds: Do SPF Respondents Have Anchored Inflation Expectations?

Carola Binder, Wesley Janson and Randal Verbrugge

Journal of Money, Credit and Banking, 2023, vol. 55, issue 2-3, 559-576

Abstract: Since the Federal Open Market Committee announced a 2% inflation target in 2012, the median long‐run inflation forecast of professional forecasters has been near target. We show, however, that most individual forecasters' long‐run inflation expectations fluctuate substantially, with sizeable departures from target. We propose a new “bounds anchoring” indicator based on deviations of individuals' long‐run forecasts from target. This indicator sheds new light on gradual changes in expectations since the 2012 announcement. We find that bounds anchoring gradually strengthened in the years following the target announcement, but that this trend has recently started to reverse.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:55:y:2023:i:2-3:p:559-576

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