How has the risk to inflation from inflation expectations evolved?
During 2011, the Monetary Policy Committee expressed concern that persistently above-target outturns of CPI inflation might lead to inflation expectations becoming less well anchored by monetary policy. And in turn, that could make inflation itself more persistent via changes in price-setting or wage-setting behaviour. But inflation is now more than 2 percentage points lower than in September 2011. In light of that, this article discusses recent movements in inflation expectations and looks at a range of indicators to assess how the risk to inflation from expectations has evolved. While the upside risk has receded a little relative to the 2010–11 H1 period, so long as inflation is above target, some risk remains.
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Volume (Year): 52 (2012)
Issue (Month): 2 ()
Pages: 114-123
| Handle: | RePEc:boe:qbullt:0074 |
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References listed on IDEAS
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- 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.
- Gürkaynak, Refet S. & Levin, Andrew & Swanson, Eric T, 2006. "Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the US, UK and Sweden," CEPR Discussion Papers 5808, C.E.P.R. Discussion Papers.
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- Barnett, Alina & Groen, Jan J J & Mumtaz, Haroon, 2010. "Time-varying inflation expectations and economic fluctuations in the United Kingdom: a structural VAR analysis," Bank of England working papers 392, Bank of England.
- 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.
- Hughes, Abigail & Saleheen, Jumana, 2012. "UK labour productivity since the onset of the crisis — an international and historical perspective," Bank of England Quarterly Bulletin, Bank of England, vol. 52(2), pages 138-146.
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