Inflation expectations of savers and borrowers

Riccardo M. Masolo () and Francesca Monti ()
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Riccardo M. Masolo: Università Cattolica del Sacro Cuore
Francesca Monti: Université catholique de Louvain, LIDAM/CORE, Belgium

No 2026015, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Households’ inflation expectations depend on their financial conditions, even after controlling demographic factors and expectations about the economic outlook. Specifically, savers report higher inflation expectations than borrowers. We establish these regularities using individual level data from the NY Fed’s Survey of Consumer Expectations, the Public Policy Survey and the Household Finance Survey. We make sense of these findings in a life-cycle model in which ambiguity-averse agents are borrowers and savers at different points in their lives. The wedge in expectations naturally arises as high inflation corresponds to the worst-case scenario for savers, while the opposite is true for borrowers.

Pages: 19
Date: 2026-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2026015

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