The Speed of Firm Response to Inflation

Ivan Yotzov, Nicholas Bloom, Philip Bunn, Paul Mizen and Gregory Thwaites

Journal of the European Economic Association, 2026, vol. 24, issue 2, 736-768

Abstract: This paper analyses the response of UK firms to monthly CPI inflation releases using high-frequency data from a large business survey. Firms’ inflation perceptions and expectations respond within hours of new inflation data releases. Firm expectations are most responsive when inflation coverage in the media is elevated, suggesting a key role for the media in focusing attention on data releases. Furthermore, firms respond to changes in inflation data, but not to surprises relative to professional forecasts. This highlights a distinction between ‘Wall Street’, where financial markets respond to inflation surprises, and ‘Main Street’, where firms respond to media inflation headlines.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:24:y:2026:i:2:p:736-768.

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