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Long-run inflation expectations in the shrinking upper tail

Carola Binder ()

Economics Letters, 2020, vol. 186, issue C

Abstract: Consumer inflation expectations are highly disperse, with some households reporting very high inflation forecasts. In recent years, disagreement in longer-run inflation expectations has fallen, reflecting compression in the upper part of the distribution. The 75th percentile of the distribution of longer-run inflation forecast has fallen 0.21 percentage points per year since 2012 and is at an all-time low. I show that the decline in long-run inflation expectations at the upper end of the distribution seems to reflect improvement in consumers’ general economic sentiment, rather than stronger anchoring of inflation expectations.

Keywords: Consumer expectations; Inflation expectations; Anchoring; Disagreement (search for similar items in EconPapers)
JEL-codes: D83 D84 E31 E52 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519304379

DOI: 10.1016/j.econlet.2019.108867

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