Survey-based expectations and uncertainty attitudes

Pessimismis commonly associated with higher inflation expectations; however, raw survey data show the opposite. Theoretically, the true relationship may be obscured by a bias in survey responses: risk-averse respondents adjust low expectations upward (high expectations downward) to minimize the expected disutility from reporting errors; pessimism amplifies this effect. While the error-minimization objective is typically associated with professional forecasters, consumers are conventionally assumed to report expectations that inform everyday consumption decisions, and to have no incentives to misreport beliefs. Yet, in our surveys, riskaversion and pessimism reduce reported expectations on average, with opposite effects for low and highbeliefs, unexplainable by personal finance, expertise, or macroeconomic conditions. These findings contradict the consumption-choice view but align well with the forecasting view. With the bias offset, pessimism raises expectations, and risk attitudes play no role