Inflation preferences

Hassan Afrouzi, Romanos Priftis, Alexander M. Dietrich, Kristian Ove R. Myrseth and Raphael S. Schoenle

No 2957, Working Paper Series from European Central Bank

Abstract: We document novel survey-based facts about preferred long-run inflation rates among US consumers. Consumers on average prefer a 0.20% annual inflation rate, well below the Federal Reserve’s 2% target. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on economic models—describing how inflation lowers the real value of wages and money holdings—affect inflation preferences. While our results can inform the design of central bank communication on inflation targets, they also raise questions about the alignment between such targets and consumer preferences. JEL Classification: C83, E31, E52

Keywords: household expectations; inflation preferences; survey (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-exp and nep-mon
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Inflation Preferences (2024)
Working Paper: Inflation Preferences (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242957

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