House price expectations and inflation expectations: evidence from survey data

Vedanta Dhamija, Ricardo Nunes and Roshni Tara
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Vedanta Dhamija: Bank of England
Ricardo Nunes: University of Surrey
Roshni Tara: Bank of England

No 1169, Bank of England Staff Working Paper series from Bank of England

Abstract: Housing is a closely monitored and prominent sector for households. We find that households in the United States tend to overweight house price expectations when forming inflation expectations with a coefficient of 25%–45%, significantly above the weight of house prices in the inflation index. We first use two data sets, a multitude of controls, and an instrumental variable approach to address endogeneity. We then use a second strategy based on household heterogeneity. As expected, we find a significant effect of numeracy skills and whether households moved house recently. We model this household behaviour in a two-sector New Keynesian model with an overweighted and a non-overweighted sector and show that overweighted sectors are disproportionately more important for monetary policy.

Keywords: Salience; inflation expectations; house price expectations; monetary policy (search for similar items in EconPapers)
JEL-codes: D10 E12 E31 E52 E58 (search for similar items in EconPapers)
Pages: 58
Date: 2026-01-23
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:023291

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