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Inflation, Expectations and Monetary Policy: What Have We Learned and to What End?

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  • Coibion, Olivier
  • Gorodnichenko, Yuriy

Abstract

We review recent research and experiences linking inflation and expectations, emphasizing what has been learned since 2020. One clear lesson is that the inflation expectations of most economic agents have been and remain unanchored. The unanchored nature of inflation expectations, in combination with supply shocks, can explain much of the inflation surge and subsequent disinflation when viewed through the lens of an expectations-augmented Phillips curve, both in the U.S. and abroad. New policy frameworks are unlikely to address this feature of expectations. Only a communication strategy that breaks what we refer to as the “cycle of selective inattention†is likely to be successful, but it is probably already too late to stop the next inflation surge.

Suggested Citation

  • Coibion, Olivier & Gorodnichenko, Yuriy, 2025. "Inflation, Expectations and Monetary Policy: What Have We Learned and to What End?," CEPR Discussion Papers 20274, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:20274
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    1. is not listed on IDEAS
    2. Bernardo Candia & James Mitchell & Damjan Pfajfar, 2026. "The Causal Effects of Tariff Uncertainty on Consumers' Macroeconomic Expectations and Spending Plans," Working Papers 26-05, Federal Reserve Bank of Cleveland.
    3. Ondrej Kusenda & Michal Marencak, 2025. "Attention to food prices and the upward bias in inflation expectations," Working and Discussion Papers WP 9/2025, Research Department, National Bank of Slovakia.
    4. Guido Ascari & Alexandre Carrier & Emanuele Gasteiger & Alex Grimaud & Gauthier Vermandel, 2026. "Monetary policy in the Euro Area, when Phillips curves ... are curves," Working Papers 861, DNB.
    5. Battistini, Niccolò & Neves, Pedro, 2026. "What drives business expectations? A tale of demand and supply," Working Paper Series 3179, European Central Bank.
    6. Yuriy Gorodnichenko & Vittal Vasudevan, 2026. "Macroeconomic Expectations in a War," Scottish Journal of Political Economy, Scottish Economic Society, vol. 73(3), July.
    7. Philippe Andrade & Michael Wicklein, 2025. "Why Have Inflation Expectations Surged Recently? A Historical Perspective," Current Policy Perspectives 25-14, Federal Reserve Bank of Boston.
    8. Çekin, Semih Emre & Polattimur, Hamza, 2025. "Televised inflation: Measuring TV news coverage and its effect on household expectations," ZEW Discussion Papers 25-051, ZEW - Leibniz Centre for European Economic Research.
    9. Razzak, Weshah, 2026. "What The RBNZ Monetary Policy Statements Tell Us About Inflation Targeting in New Zealand 1990-2025," MPRA Paper 128887, University Library of Munich, Germany.
    10. Erwan Gautier & Frédérique Savignac & Olivier Coibion, 2025. "Firms’ Inflation and Wage Expectations During the Inflation Surge," NBER Working Papers 33799, National Bureau of Economic Research, Inc.
    11. Siye Bae & Sangyup Choi & Sang-Hyun Kim & Myunghwan Andrew Lee & Myungkyu Shim, 2025. "Can We Anchor Macroeconomic Expectations Across Party Lines? Evidence from a Randomized Control Trial," Working papers 2025rwp-255, Yonsei University, Yonsei Economics Research Institute.
    12. Jung, Alexander & Mongelli, Francesco Paolo, 2025. "Central bank communication with non-experts: insights from a randomized field experiment," Working Paper Series 3103, European Central Bank.

    More about this item

    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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