IDEAS home Printed from https://ideas.repec.org/p/boe/boeewp/1125.html
   My bibliography  Save this paper

Food prices matter most: sensitive household inflation expectations

Author

Listed:
  • Anesti, Nikoleta

    (Bank of England)

  • Esady, Vania

    (Bank of England)

  • Naylor, Matthew

    (Bank of England)

Abstract

We construct a novel data set to investigate the sensitivity of household inflation expectations to personal experienced inflation, testing whether households weigh price changes differently across items in the consumption basket. Across households of all age, income, gender, work status, UK region, and house tenure groups, food prices matter significantly more for inflation expectations dynamics than other components, including energy. In particular, households’ expectations are sensitive to changes in food price-driven inflation at short, medium and long horizons, and this association is persistent, non-linear and asymmetric. Our results imply that the risk of household expectations contributing to persistent inflationary dynamics are greatest following large and inflationary shocks to, specifically, food prices. Moreover, our findings can rationalise a number of empirical regularities related to household expectations: their upwards bias relative to actual inflation; cross-sectional heterogeneity across demographic groups; and their ‘supply-side’ oriented view of the economy.

Suggested Citation

  • Anesti, Nikoleta & Esady, Vania & Naylor, Matthew, 2025. "Food prices matter most: sensitive household inflation expectations," Bank of England working papers 1125, Bank of England.
    • Handle: RePEc:boe:boeewp:1125
    as

    Download full text from publisher

    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2025/food-prices-matter-most-sensitive-household-inflation-expectations.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Households; inflation expectations; inflation experiences; food prices; heterogeneity; persistence; non-linearities; asymmetries;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:1125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Digital Media Team (email available below). General contact details of provider: https://edirc.repec.org/data/boegvuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.