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Why Consumers Disagree About Future Inflation

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  • Naveen Rai
  • Patrick Sabourin

Abstract

Since 2022, consumer inflation expectations have shifted, with a significant increase in those expecting high inflation in the coming year and a surge in those expecting deflation further in the future. Using data from the Canadian Survey of Consumer Expectations, this paper seeks to assess the factors that influence people to expect high inflation, moderate inflation or deflation. While expectations of high inflation are largely based on perceptions about current inflation, most of those anticipating future deflation do not see the Canadian economy as currently deflationary. Rather, their deflationary outlook since 2022 has hinged on the belief that current inflation-inducing supply and demand factors such as supply chain issues are temporary and will reverse, triggering price declines.

Suggested Citation

  • Naveen Rai & Patrick Sabourin, 2023. "Why Consumers Disagree About Future Inflation," Discussion Papers 2023-11, Bank of Canada.
    • Handle: RePEc:bca:bocadp:23-11
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    References listed on IDEAS

    as
    1. Francesco D'Acunto & Ulrike M. Malmendier & Michael Weber & Michael Weber, 2022. "What Do the Data Tell Us about Inflation Expectations?," CESifo Working Paper Series 9602, CESifo.
    2. Alan K. Detmeister & David E. Lebow & Ekaterina V. Peneva, 2016. "Inflation Perceptions and Inflation Expectations," FEDS Notes 2016-12-05-2, Board of Governors of the Federal Reserve System (U.S.).
    3. Armantier, Olivier & Koşar, Gizem & Pomerantz, Rachel & Skandalis, Daphné & Smith, Kyle & Topa, Giorgio & van der Klaauw, Wilbert, 2021. "How economic crises affect inflation beliefs: Evidence from the Covid-19 pandemic," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 443-469.
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    More about this item

    Keywords

    Inflation and prices;

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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