The financial crisis and inflation expectations

Bharat Trehan () and Oskar Zorrilla

FRBSF Economic Letter, 2012, issue sep24

Abstract: One measure of a successful monetary policy is its ability to anchor expectations about future inflation rates. Financial crises, such as that of 2008?09, can be considered natural experiments that test this anchoring. The effects of the crisis on inflation expectations were largely temporary in the United States, but longer-lasting in the United Kingdom. That is surprising because the United Kingdom had a formal inflation target during this period. Expectations may have been affected more because inflation stayed above the central bank?s target for extended periods following the crisis.

Keywords: Inflation targeting; Inflation (Finance); Financial crises - United States (search for similar items in EconPapers)
Date: 2012
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