Expected Inflation in the Euro Area: Measurement and Policy Responses

Ricardo Reis

No 17849, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Measures of expected inflation from both surveys and market prices provided valuable signals during the 2021-22 rise in euro area inflation. Combining these measures, as opposed to picking just one, and looking at distributions, as opposed to only measures of central tendency, showed a sustained drift upwards in inflation expectations since the middle of 2021. In June of 2022, these measures point to an expected gradual decline in inflation over the next two years, and a small risk to the credibility of the ECB’s inflation target. A baseline model suggests that a central bank should respond to these measures by raising interest rates. How much and how fast depends on how it assesses the source of the shock and how expectations are linked to actions.

Keywords: Phillips curve; Monetary policy (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 (search for similar items in EconPapers)
Date: 2023-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17849 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Expected Inflation in the Euro Area: Measurement and Policy Responses (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17849

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17849

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().