Forceful or persistent: How the ECB's new inflation target affects households' inflation expectations

Mathias Hoffmann, Emanuel Mönch, Lora Pavlova and Guido Schultefrankenfeld
Authors registered in the RePEc Author Service: Emanuel Moench

No 24-082, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We study how households adjust their medium-term inflation expectations under the new ECB inflation targeting strategy. Survey respondents make little difference between the previous strategy of targeting inflation rates close to but below 2% and the new strategy with a 2% point target. Participants who learn about the inherent asymmetry in the ECB's reaction to potential off-target inflation expect moderately higher medium-term inflation. Respondents asked to assume a scenario of current inflation running below target place a significantly higher probability on medium-term outcomes above 2%. In a scenario of inflation currently running above target, however, participants do not in turn expect an undershooting of medium-term inflation.

Keywords: Monetary Policy Strategy; Household Inflation Expectations; Randomized Control Trial; Survey Data (search for similar items in EconPapers)
JEL-codes: E31 E52 F33 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Forceful or persistent: Wow the ECB's new inflation target affects households' inflation expectations (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:312570

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