Anchoring Inflation Expectations in Unconventional Times: Micro Evidence for the Euro Area

We exploit micro data from professional forecasters to examine the stability of the distribution of long-term inflation expectations in the euro area following the Great Recession. Although mean expectations declined somewhat, we find no evidence that the central tendency of the long-run distribution became unanchored. Also, the degree of co-movement of expectations with other variables did not increase noticeably. In contrast, long-term inflation uncertainty increased and expectations became negatively skewed. Such findings are in line with the predictions of theoretical models emphasizing the impact of the lower bound on policy rates and uncertainty about the transmission of unconventional monetary policies.