Inflation News and Euro-Area Inflation Expectations

Juan Angel García and Sebastian E. V. Werner
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Juan Angel García: European Central Bank
Sebastian E. V. Werner: Independent

International Journal of Central Banking, 2021, vol. 17, issue 3, 1-60

Abstract: The protracted period of low inflation in the euro area since 2013 has triggered a significant decline in long-term inflation compensation. This paper re-investigates changes in the sensitivity of inflation compensation to inflation and macroeconomic news and expands existing work in two key dimensions: (i) we analyze all available (advanced) inflation releases for country and euro-area-wide inflation; (ii) we use daily frequency, time-varying sensitivity, and intraday regressions to reach more robust conclusions. Our key findings are twofold. First, timeliness is crucial in inflation markets: it is the early inflation news (flash estimates) which led to revisions in longterm compensation. Second, the anchoring of euro-area inflation expectations has weakened significantly since 2013.

JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2021:q:3:a:1

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