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UID:182-39@berlinschoolofeconomics.de
CLASS: PUBLIC
SUMMARY:Research Seminar in Economics: Richhild Moessner (BIS Basel)
DESCRIPTION:Topic: Reactions of household inflation expectations to a symm
 etric inflation target and high inflation\n\nSpeaker: Richhild Moessner (
 BIS Basel)\n\nTime & venue: Fridays, 10:00 - 12:00 (starting on 27.10.2023
 ); see schedule for seminar venues \n\nDescription: The Research Semin
 ar in Economics offers a platform for invited speakers to present their cu
 rrent research, thereby promoting the exchange between speakers and facult
 y members. It covers empirical as well as theoretical contributions across
  all fields of economics.\n\nMore information can be found on the seminar
 's website.\n\nAbstract: We provide evidence on the reactions of the leve
 l and probability distribution of households’ expectations of inflation 
 in the euro area to the ECB’s monetary strategy change to a symmetric in
 flation target in July 2021, and to the subsequent strong rise in euro are
 a inflation above target. We use a randomised control trial within a month
 ly representative Dutch household survey of short- and long-term euro area
  inflation expectations, where half of respondents receive information abo
 ut the ECB’s inflation target and actual inflation. The survey responses
  give rise to three main findings. First, we find that the introduction of
  a symmetric inflation target by the ECB did not have a significant immedi
 ate upward effect on the level of either long-term or short-term euro area
  inflation expectations of consumers, both for the group with information 
 treatment and for the control group. Second, and by contrast, euro area lo
 ng-term and short-term inflation expectations increased significantly in t
 he period when inflation increased strongly above target. Taken together, 
 the results document that the ECB strategy revision itself did not have a 
 material impact on household inflation expectations, but the high realisat
 ions of actual inflation did. These findings suggest that when it comes to
  household inflation expectations and central bank credibility, inflation 
 outcomes speak louder than words. The third finding is that households’ 
 expected probabilities of high euro area inflation (4% or higher) also inc
 reased significantly in response to high above-target inflation at both th
 e long- and short-term horizons, and both for the group with information t
 reatment and for the control group. These results suggest that long-term e
 uro area inflation expectations of households have become less well anchor
 ed as inflation has increased strongly above target.  
DTSTAMP:20231106T112703Z
DTSTART:20231116T100000Z
DTEND:20231116T120000Z
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