Average Inflation Targeting and Household Expectations
Edward Knotek () and
No 27836, NBER Working Papers from National Bureau of Economic Research, Inc
Using a daily survey of U.S. households, we study how the Federal Reserve’s announcement of its new strategy of average inflation targeting affected households’ expectations. Starting with the day of the announcement, there is a very small uptick in the minority of households reporting that they had heard news about monetary policy relative to prior to the announcement, but this effect fades within a few days. Those hearing news about the announcement do not seem to have understood the announcement: they are no more likely to correctly identify the Fed’s new strategy than others, nor are their expectations different. When we provide randomly selected households with pertinent information about average inflation targeting, their expectations still do not change in a different way than when households are provided with information about traditional inflation targeting. Even one year after the announcement, U.S. households remain mostly unaware of the change in strategy or its implications.
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
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Working Paper: Average Inflation Targeting and Household Expectations (2021)
Working Paper: Average Inflation Targeting and Household Expectations (2020)
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