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Does the tail wag the dog? A closer look at recent movements in the distributions of professional forecasters’ inflation expectations

Author

Listed:
  • Gόrnicka, Lucyna
  • Meyler, Aidan

Abstract

The strong rise in inflation has renewed attention on longer-term inflation expectations. The distribution of individual longer-term inflation expectations from the ECB Survey of Professional Forecasters has recently recentred around 2%, although some respondents have lately raised their inflation expectations clearly above 2%. Some commentators have argued that movements in the upper “tails” of the inflation expectations’ distribution might signal a possible de-anchoring of expectations. This box takes a closer look at recent movements in long-term inflation expectations, especially of those forecasters currently in the upper tail of the distribution. We find that (a) historically, this tail group's longer-term inflation expectations have been higher, more volatile and more sensitive to realised inflation than the expectations of the rest of respondents, (b) respondents in this tail group perceive the current inflation spike to be more persistent, and (c) the evidence suggests that their expectations have not led movements in those of the rest of the professional forecasters. JEL Classification: E3, D83, D84

Suggested Citation

  • Gόrnicka, Lucyna & Meyler, Aidan, 2022. "Does the tail wag the dog? A closer look at recent movements in the distributions of professional forecasters’ inflation expectations," Economic Bulletin Boxes, European Central Bank, vol. 6.
  • Handle: RePEc:ecb:ecbbox:2022:0006:3
    Note: 496790
    as

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    More about this item

    Keywords

    professional forecasters; Survey inflation expectations;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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