IDEAS home Printed from https://ideas.repec.org/a/boe/qbullt/0047.html
   My bibliography  Save this article

Assessing the risk to inflation from inflation expectations

Author

Listed:

Abstract

Inflation expectations play an important role in the transmission mechanism of monetary policy. There is a risk that the periods of above-target CPI inflation in the past three years might cause inflation expectations to drift upwards. That might make inflation itself more persistent, via changes in price and wage-setting behaviour. And so, other things being equal, returning inflation to target would require tighter monetary policy. This article provides a framework that can be used to monitor the risk to inflation from inflation expectations. While recent developments provide few signs that the risk is materialising, the imperfect nature of data mean that the risk can be assessed only imperfectly.

Suggested Citation

  • Macallan, Clare & Taylor, Tim & O'Grady, Tom, 2011. "Assessing the risk to inflation from inflation expectations," Bank of England Quarterly Bulletin, Bank of England, vol. 51(2), pages 100-110.
  • Handle: RePEc:boe:qbullt:0047
    as

    Download full text from publisher

    File URL: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2011/assessing-the-risk-to-inflation-from-inflation-expectations.pdf?la=en&hash=A3C1D31786E883254BF9031FC6C70FEE006C3AC0
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Refet S. Gürkaynak & Andrew T. Levin & Eric T. Swanson, 2006. "Does inflation targeting anchor long-run inflation expectations? evidence from long-term bond yields in the U.S., U.K., and Sweden," Working Paper Series 2006-09, Federal Reserve Bank of San Francisco.
    2. Felix Ritchie, 2008. "Secure access to confidential microdata: four years of the Virtual Microdata Laboratory," Economic & Labour Market Review, Palgrave Macmillan;Office for National Statistics, pages 29-34.
    3. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1295-1328.
    4. Gianna Boero & Jeremy Smith & KennethF. Wallis, 2008. "Uncertainty and Disagreement in Economic Prediction: The Bank of England Survey of External Forecasters," Economic Journal, Royal Economic Society, vol. 118(530), pages 1107-1127, July.
    5. Miles Parker, 2017. "Price-setting behaviour in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, pages 217-236.
    6. Alex Brazier & Richard Harrison & Mervyn King & Tony Yates, 2008. "The Danger of Inflating Expectations of Macroeconomic Stability: Heuristic Switching in an Overlapping-Generations Monetary Model," International Journal of Central Banking, International Journal of Central Banking, vol. 4(2), pages 219-254, June.
    7. Refet S Gürkaynak & Andrew Levin & Eric Swanson, 2010. "Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from the U.S., UK, and Sweden," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1208-1242, December.
    8. Corder, Matthew & Eckloff, Daniel, 2011. "International evidence on inflation expectations during Sustained Off-Target Inflation episodes," Bank of England Quarterly Bulletin, Bank of England, vol. 51(2), pages 111-115.
    9. Michael F. Bryan & Brent Meyer, 2010. "Are some prices in the CPI more forward looking than others? We think so," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicholas Crafts, 2013. "Returning to Growth: Policy Lessons from History," Fiscal Studies, Institute for Fiscal Studies, pages 255-282.
    2. Ádám Reiff & Judit Várhegyi, 2013. "Sticky Price Inflation Index: An Alternative Core Inflation Measure," MNB Working Papers 2013/2, Magyar Nemzeti Bank (Central Bank of Hungary).
    3. Corder, Matthew & Eckloff, Daniel, 2011. "International evidence on inflation expectations during Sustained Off-Target Inflation episodes," Bank of England Quarterly Bulletin, Bank of England, vol. 51(2), pages 111-115.
    4. Harimohan, Rashmi, 2012. "How has the risk to inflation from inflation expectations evolved?," Bank of England Quarterly Bulletin, Bank of England, vol. 52(2), pages 114-123.
    5. Pongsak Luangaram & Yuthana Sethapramote & Chutiorn Tontivanichnon, 2015. "Inflation Expectations and Monetary Policy in Thailand," PIER Discussion Papers 3., Puey Ungphakorn Institute for Economic Research, revised Sep 2015.
    6. Reyna Vergara González & Elías Eduardo Gutiérrez Alva, 2014. "Evaluación del cumplimiento de los objetivos de inflación y el papel de las expectativas: evidencia para México, 1995-2012," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 1-32, November.
    7. Dániel Felcser, 2013. "How should the central bank react to the VAT increase?," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), pages 35-41.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boe:qbullt:0047. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Group). General contact details of provider: http://edirc.repec.org/data/boegvuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.