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Pass-through from short-horizon to long-horizon inflation expectations, and the anchoring of inflation expectations

James Yetman ()

No 895, BIS Working Papers from Bank for International Settlements

Abstract: We investigate pass-through from short-horizon to long-horizon inflation forecasts as a way to assess the anchoring of inflation expectations. We find an overall decline in the pass-through in our sample, with the share of economies having anchored expectations increasing over time. We then investigate what might explain the increase in anchoring. Inflation targeting plays an important role. Low policy rates and persistent deviations of inflation from target are correlated with a decline in expectations' pass-through. This suggests that longer-term expectations remain well anchored, despite recent low inflation out-turns in many economies.

Keywords: consensus forecasts; inflation expectations anchoring (search for similar items in EconPapers)
JEL-codes: E31 E58 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2020-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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