Energy Prices and Inflation Expectations: Evidence from Households and Firms

Nils Wehrhöfer

Journal of Political Economy Macroeconomics, 2026, vol. 4, issue 1, 135 - 163

Abstract: I investigate how households and firms adjust their inflation expectations when they are exposed to an energy price increase. Using monthly panel survey data and a difference-in-differences approach, I show that exposed households increase their inflation expectations when electricity prices increase. This result is consistent with households extrapolating the price changes they face. Furthermore, households’ inflation forecasts become less accurate and diverge more from professional forecasts. Exposed firms exhibit significant pass-through to output prices but do not update their inflation expectations differentially. I find evidence consistent with information frictions playing a role in explaining the differences between households and firms.

Date: 2026
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