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Unexpecting the Expected in Real-Time Inflation Forecasting: The Inflation Expectations Channel?

Author

Listed:
  • Nicolás Bonino-Gayoso

    (Universidad Complutense de Madrid)

  • Mónica Correa-López

    (Banco de España)

Abstract

This paper empirically explores the pass-through channel of inflation expectations to inflation by looking at a real-time macroeconomic forecasting exercise conducted by an exogenous observer. Models that are informed either by households’ updated beliefs about future inflation or, especially, by services firms’ expected changes in their own prices can systematically predict core inflation more accurately – and do so in a stable way – than a class of commonly used models that do not use this information. Qualitative updates in households and firms price surveys emerge as relevant signals of consumer and firm behavior, since they influence aggregate inflation dynamics. These results point to an economically meaningful pass-through channel of short-term inflation expectations to inflation.

Suggested Citation

  • Nicolás Bonino-Gayoso & Mónica Correa-López, 2026. "Unexpecting the Expected in Real-Time Inflation Forecasting: The Inflation Expectations Channel?," Working Papers 2613, Banco de España.
    • Handle: RePEc:bde:wpaper:2613
    DOI: https://doi.org/10.53479/42915
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    References listed on IDEAS

    as
    1. Magdalena Grothe & Aidan Meyler, 2018. "Inflation Forecasts: Are Market-Based and Survey-Based Measures Informative?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(1), pages 171-188, January.
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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