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Gabriele Galati, Richhild Moessner, Maarten van Rooij, The anchoring of long-term inflation expectations of consumers: insights from a new survey, Oxford Economic Papers, Volume 75, Issue 1, January 2023, Pages 96–116, https://doi.org/10.1093/oep/gpac005
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Abstract
We provide new evidence on the level and probability distribution of consumers’ long-term expectations of inflation in the euro area and the Netherlands, using a new monthly representative Dutch survey before and during the COVID-19 pandemic. We find that consumers’ expectations of euro area and Dutch inflation 10 years ahead have not been well anchored at the ECB’s inflation aim of below, but close to 2%. Median expectations have remained elevated above the European Central Bank's (ECB) inflation aim throughout the pandemic. Moreover, individual probability distributions show that expected probabilities of higher inflation (4% or higher) have continuously been larger than those of lower inflation (0% or lower). While policymakers are currently concerned about a possible de-anchoring of inflation expectations on the downside, our results suggest that from a consumer’s point of view de-anchoring of long-term inflation expectations is mainly due to expected high inflation rather than low inflation.
