On inflation perceptions and expectations for Greek and euro area consumers: evidence from the consumer expectations survey

This paper empirically investigates how inflation perceptions and inflation expectations are shaped for Greek and euro area consumers, using data from the Consumer Expectations Survey (CES). We document that median inflation perceptions as well as short-term, medium-term and long-term inflation expectations over time are higher in Greece than in the euro area. In favour of the supply-side narrative of inflation expectations, we find that consumers’ inflation expectations are negatively correlated with their expectations for economic growth, while they are positively correlated with their expectations for the unemployment rate in Greece and the euro area. We also show that inflation perceptions are strongly and positively associated with inflation expectations, yet the magnitude of this association declines as the inflation forecast horizon lengthens. Finally, the results also indicate that the impact of socioeconomic variables on inflation expectations varies between Greek and euro area consumers and is heterogeneous across different forecast horizons.