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Inflation Expectations and Household Spending: Different Patterns in Low- and High-Inflation Settings

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  • Bernardo Candia

Abstract

Using multiple randomized controlled trials (RCTs) implemented through surveys of US households, I show that household spending responses to exogenous changes in inflation expectations depend on the inflation environment. In times of low inflation, higher inflation expectations arising from information treatments lead households to reduce their consumption of durable goods (the negative income/uncertainty effect dominates). In contrast, in times of high inflation, I find a sharp positive effect on durable goods spending after an exogenous shock to inflation expectations (intertemporal substitution effect dominates).

Suggested Citation

  • Bernardo Candia, 2026. "Inflation Expectations and Household Spending: Different Patterns in Low- and High-Inflation Settings," Working Papers 26-26, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:103916
    DOI: 10.26509/frbc-wp-202626
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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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