Anchoring of survey-based inflation expectations: Risk assessment relative to the inflation target

Ute Volz and Florian Wicknig

No 02/2025, Technical Papers from Deutsche Bundesbank

Abstract: We propose novel measures to evaluate the risk profile of longer-term inflation expectations, using data on inflation probabilities from the ECB's Survey of Professional Forecasters (SPF). Unlike existing indicators, these measures specifically incorporate the central bank's inflation target. This allows for a more precise assessment of forecasters' perceptions of risks to the central bank's ability to achieve its target. Consequently, these measures provide a valuable additional criterion for assessing the degree of expectation anchoring. In contrast to other metrics, our measures indicate that, between 2014 and 2017 as well as during the Covid-19 crisis, professional forecasters saw the risk that inflation could undershoot the target in the longer term. Moreover, our indicators suggest that, following Russia's invasion of Ukraine, survey participants perceived a risk of inflation overshooting the target four to five years ahead.

Keywords: Inflation; Expectations; Monetary Policy; Survey of Professional Forecasters (search for similar items in EconPapers)
JEL-codes: E31 E58 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-cba, nep-cis, nep-for, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubtps:323949

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