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

Author

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  • Olivier Coibion
  • Yuriy Gorodnichenko

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

  • Olivier Coibion & Yuriy Gorodnichenko, 2025. "Inflation, Expectations and Monetary Policy: What Have We Learned and to What End?," NBER Working Papers 33858, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33858
    Note: EFG IFM ME
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    Cited by:

    1. Gorodnichenko, Yuriy & Vasudevan, Vittal, 2025. "Macroeconomic Expectations in a War," IZA Discussion Papers 18017, IZA Network @ LISER.
    2. Philippe Andrade & Michael Wicklein, 2025. "Why Have Inflation Expectations Surged Recently? A Historical Perspective," Current Policy Perspectives 25-14, Federal Reserve Bank of Boston.
    3. 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.
    4. 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.
    5. 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.
    6. 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

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • 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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