Unexpecting the Expected in Real-Time Inflation Forecasting: The Inflation Expectations Channel?

Nicolás Bonino-Gayoso and Mónica Correa-López
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Nicolás Bonino-Gayoso: Universidad Complutense de Madrid
Mónica Correa-López: Banco de España

No 2613, Working Papers from Banco de España

Abstract: This paper empirically explores the pass-through channel of inflation expectations to inflation by looking at a real-time macroeconomic forecasting exercise conducted by an exogenous observer. Models that are informed either by households’ updated beliefs about future inflation or, especially, by services firms’ expected changes in their own prices can systematically predict core inflation more accurately – and do so in a stable way – than a class of commonly used models that do not use this information. Qualitative updates in households and firms price surveys emerge as relevant signals of consumer and firm behavior, since they influence aggregate inflation dynamics. These results point to an economically meaningful pass-through channel of short-term inflation expectations to inflation.

Keywords: inflation; inflation expectations; Phillips curve; real-time forecasting (search for similar items in EconPapers)
JEL-codes: E31 E37 E52 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2026-03
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2613

DOI: 10.53479/42915

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