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Anchoring of inflation expectations in the euro area: Recent evidence based on survey data

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  • Łyziak, Tomasz
  • Paloviita, Maritta

Abstract

This article analyses the anchoring of inflation expectations of professional forecasters and consumers in the euro area. We study anchoring, defined as the central bank's ability to manage expectations, by paying special attention to the impact of the ECB inflation target and ECB inflation projections on inflation expectations. Our analysis indicates that in the post-crisis period longer-term inflation expectations have become somewhat more sensitive to shorter-term ones and to actual HICP inflation. We also find that the ECB inflation projections have recently become more important for short- and medium-term expectations of professional forecasters and at the same time the role of the ECB inflation target for those expectations has diminished. Overall, our analysis suggests that in recent years inflation expectations in the euro area have shown some signs of de-anchoring.

Suggested Citation

  • Łyziak, Tomasz & Paloviita, Maritta, 2017. "Anchoring of inflation expectations in the euro area: Recent evidence based on survey data," European Journal of Political Economy, Elsevier, vol. 46(C), pages 52-73.
  • Handle: RePEc:eee:poleco:v:46:y:2017:i:c:p:52-73
    DOI: 10.1016/j.ejpoleco.2016.11.001
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    More about this item

    Keywords

    D84; E52; E58; Inflation expectations; Anchoring; Survey data; Euro area; Financial crisis;

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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