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Inflation Preferences

Author

Listed:
  • Afrouzi, Hassan
  • Dietrich, Alexander
  • Myrseth, Kristian
  • Priftis, Romanos
  • Schoenle, Raphael

Abstract

We document novel survey-based facts on preferred long-run inflation rates among U.S. consumers. Consumers on average prefer a 0.20% annual inflation rate, considerably below the Federal Reserve’s 2% target. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on economic models---describing how inflation lowers the real value of wages as well as money holdings---affect inflation preferences. While our results can inform the design of central bank communication on inflation targets, they also raise questions about the alignment between such targets and consumer preferences.

Suggested Citation

  • Afrouzi, Hassan & Dietrich, Alexander & Myrseth, Kristian & Priftis, Romanos & Schoenle, Raphael, 2024. "Inflation Preferences," CEPR Discussion Papers 19006, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19006
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    Keywords

    Household expectations;

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods

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