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Inflation expectations in the euro area: trends and policy considerations

Author

Listed:
  • Christophe Blot

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Caroline Bozou

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Jérôme Creel

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

Most economic decisions of economic agents are based upon expectations of inflation. Inflation expectations play an important role for the determination of inflation and the transmission of monetary policy. They are not observable and are inferred from alternative indicators. We show that all these measures generally fail to predict inflation. We also assess their anchoring and show that long-term expectations are better anchored to the inflation target than inflation expectations at shorter horizons. This paper was provided by the Policy Departmentfor Economic, Scientific and Quality of Life Policies at the request of the committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 7 February 2022.

Suggested Citation

  • Christophe Blot & Caroline Bozou & Jérôme Creel, 2022. "Inflation expectations in the euro area: trends and policy considerations," SciencePo Working papers Main hal-03943684, HAL.
    • Handle: RePEc:hal:spmain:hal-03943684
    DOI: 10.2861/744032
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03943684
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    1. repec:hal:spmain:info:hdl:2441/9pfqu3qcd90b899mr93c3dnfd is not listed on IDEAS
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    1. Ahmed, Rizwan & Chen, Xihui Haviour & Kumpamool, Chamaiporn & Nguyen, Dung T.K., 2023. "Inflation, oil prices, and economic activity in recent crisis: Evidence from the UK," Energy Economics, Elsevier, vol. 126(C).

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    Keywords

    central bank; economic forecasting; euro area; inflation; monetary policy;
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