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Navigating regimes: does knowledge of current inflation matter for households?

Author

Listed:
  • Marco Flaccadoro

    (Bank of Italy)

  • Concetta Rondinelli

    (Bank of Italy)

  • Stefania Villa

    (Bank of Italy)

Abstract

This study analyses how household inflation and consumption expectations vary in response to information about inflation at different stages of its cycle. The analysis is based on a survey of Italian households, within which a randomly selected subset is provided with recent inflation data. Households who are given the information when inflation is rising also raise their inflation expectations, showing they had not taken on board its recent increase. Conversely, households who are informed when inflation is declining reduce their inflation expectations, whereas the other households remain anchored to previous high levels. Exposure to inflation data also exerts significant influence on consumption expectations. Knowledge of previous high levels discourages spending, while awareness of low inflation encourages it, particularly among less affluent households. These results are consistent with interpretations by households of inflation dynamics through a supply-side lens, especially when they are driven by energy prices.

Suggested Citation

  • Marco Flaccadoro & Concetta Rondinelli & Stefania Villa, 2025. "Navigating regimes: does knowledge of current inflation matter for households?," Questioni di Economia e Finanza (Occasional Papers) 933, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_933_25
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2025-0933/QEF_993_25.pdf
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    More about this item

    Keywords

    household consumption; inflation expectations; information treatment;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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