Kinga Stanislawska

A closer look at consumers' inflation expectations – evidence from the ECB’s Consumer Expectations Survey

Retrieved on: 
Friday, November 11, 2022
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= A closer look at consumers inflation expectations evidence from the ECBs Consumer Expectations Survey =

Key Points: 
  • = A closer look at consumers inflation expectations evidence from the ECBs Consumer Expectations Survey =
    Published as part of the ECB Economic Bulletin, Issue 7/2022.
  • In this box, we analyse developments in consumers inflation expectations [1] using data from the ECBs Consumer Expectations Survey (CES), which was launched in 2020.
  • [2] We look at changes in the entire distribution of inflation expectations, focusing on both mean and median inflation expectations, as the two measures can differ owing to skew in survey responses.
  • Expectations for three years ahead measure more medium-term inflation expectations and, as such, better capture the potential risks of the de-anchoring of inflation expectations from a central banks inflation target.
  • [4] More medium-term inflation expectations remained broadly unchanged until March 2022, when median inflation expectations for three years ahead increased to 3% following the Russian invasion of Ukraine.
  • Consumers mean and median inflation expectations and HICP inflation
    (percentages; annual percentage changes)

    Sources: ECBs Consumer Expectations Survey and Eurostat.

  • Although perceptions of actual inflation and short-term inflation expectations have risen, the term structure of consumers inflation expectations has remained strongly downward sloping.
  • By combining information on inflation expectations at different horizons, a term structure of consumers inflation expectations can be constructed.
  • The responsiveness of inflation expectations to inflation perceptions has increased slightly, but it remains noticeably lower for medium-term inflation expectations.
  • [8] Inflation perceptions in the regressions of short-term and medium-term inflation expectations
    (coefficient on revisions to inflation perceptions)

    Source: ECBs Consumer Expectations Survey.