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On the anchoring of inflation expectations in the euro area

Author

Listed:
  • Stefano Neri

    (Bank of Italy)

  • Guido Bulligan

    (Bank of Italy)

  • Sara Cecchetti

    (Bank of Italy)

  • Francesco Corsello

    (Bank of Italy)

  • Andrea Papetti

    (Bank of Italy)

  • Marianna Riggi

    (Bank of Italy)

  • Concetta Rondinelli

    (Bank of Italy)

  • Alex Tagliabracci

    (Bank of Italy)

Abstract

This paper assesses the anchoring of long-term inflation expectations in the euro area, a key issue from a monetary policy perspective, using a range of measures of inflation expectations and methods. The overall reading of the evidence is that long-term inflation expectations in the euro area have rapidly returned to levels close to the new 2 per cent symmetric inflation target of the ECB announced in July 2021, in a context of elevated inflationary pressures linked to the recent surge in energy prices and persistent supply-side bottlenecks. Nonetheless, the risk of an upward de-anchoring of long-term inflation expectations deserves close and continuous monitoring. This risk has to be taken into account when assessing the appropriate pace of normalization of the ECB’s monetary policy stance, acknowledging that the inflation outlook is surrounded by high uncertainty, as signalled by all types of expectations.

Suggested Citation

  • Stefano Neri & Guido Bulligan & Sara Cecchetti & Francesco Corsello & Andrea Papetti & Marianna Riggi & Concetta Rondinelli & Alex Tagliabracci, 2022. "On the anchoring of inflation expectations in the euro area," Questioni di Economia e Finanza (Occasional Papers) 712, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_712_22
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2022-0712/QEF_712_22.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    inflation expectations; survey data; professional forecasters; consumers’ expectations; market based expectations;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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