From traits to rates: How personality shapes inflation expectations (Philipp Roderweis, Alexander Toplitsch)

Using data from the 2023 Austrian Household Finance and Consumption Survey this paper provides first evidence on the role of personality traits in shaping households’ inflation expectations. Extracting and validating the Big Five traits for Austria for the first time, we show personality traits explain substantial variation in inflation expectations, adding 70% to the explained variance accounted for by sociodemographics. For instance, consumers at the 90th percentile of the openness to experience trait report inflation expectations 0.66 percentage points higher than those at the 10th percentile. A large share of Austrian households update expectations adaptively from past experienced inflation rather than anchoring to the ECB’s price stability target. Personality traits predict both this anchoring behavior and households’ absolute forecast error, highlighting their relevance for Taylor-rule effectiveness. Positive policy signals, education and participation in the financial market mediates these effects. The results have direct implications for monetary policy transmission, macroeconomic modeling, and central bank communication strategies.