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Inflation Preferences

Author

Listed:
  • Hassan Afrouzi
  • Alexander Dietrich
  • Kristian Myrseth
  • Romanos Priftis
  • Raphael Schoenle

Abstract

We document novel survey-based facts on preferred long-run inflation rates among U.S. consumers. Consumers on average prefer a 0.20% annual inflation rate, considerably below the Federal Reserve’s 2% target. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on economic models—describing how inflation lowers the real value of wages as well as money holdings—affect inflation preferences. While our results can inform the design of central bank communication on inflation targets, they also raise questions about the alignment between such targets and consumer preferences.

Suggested Citation

  • Hassan Afrouzi & Alexander Dietrich & Kristian Myrseth & Romanos Priftis & Raphael Schoenle, 2024. "Inflation Preferences," NBER Working Papers 32379, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32379
    Note: ME
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    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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