What information is important for households’ inflation expectations: evidence from a randomized controlled trial

In theory, the anchoring of household inflation expectations contributes a lot to the success of inflation targeting, since inflation expectations may significantly influence consumer and financial decisions. In this paper, we estimate the causal relationship between information and the inflation expectations of Russian households using a randomized controlled trial (RCT) approach applied to the data of the 6th wave of the Survey of Consumer Finance (2024). To the best of our knowledge, this is the first study of this kind based on Russian data. According to our estimates, direct, quantitative estimates of future inflation are more sensitive to incoming information. Respondents react most strongly to the treatment about growth in the money supply in the previous year, adjusting their inflation expectations upwards. At the same time, as opposed to research based on data from other countries, we find no relationship between information about inflation in the past year or about the central bank's target and its success in inflation targeting, on the one hand, and household inflation expectations, on the other. This means that monetary policy should react more strongly to pro-inflationary shocks to achieve the target. Actions, not words, matter the most.