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Anchoring of survey-based inflation expectations: Risk assessment relative to the inflation target

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  • Volz, Ute
  • Wicknig, Florian

Abstract

We propose novel measures to evaluate the risk profile of longer-term inflation expectations, using data on inflation probabilities from the ECB's Survey of Professional Forecasters (SPF). Unlike existing indicators, these measures specifically incorporate the central bank's inflation target. This allows for a more precise assessment of forecasters' perceptions of risks to the central bank's ability to achieve its target. Consequently, these measures provide a valuable additional criterion for assessing the degree of expectation anchoring. In contrast to other metrics, our measures indicate that, between 2014 and 2017 as well as during the Covid-19 crisis, professional forecasters saw the risk that inflation could undershoot the target in the longer term. Moreover, our indicators suggest that, following Russia's invasion of Ukraine, survey participants perceived a risk of inflation overshooting the target four to five years ahead.

Suggested Citation

  • Volz, Ute & Wicknig, Florian, 2025. "Anchoring of survey-based inflation expectations: Risk assessment relative to the inflation target," Technical Papers 02/2025, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubtps:323949
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    References listed on IDEAS

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    1. Corsello, Francesco & Neri, Stefano & Tagliabracci, Alex, 2021. "Anchored or de-anchored? That is the question," European Journal of Political Economy, Elsevier, vol. 69(C).
    2. Łyziak, Tomasz & Paloviita, Maritta, 2017. "Anchoring of inflation expectations in the euro area: Recent evidence based on survey data," European Journal of Political Economy, Elsevier, vol. 46(C), pages 52-73.
    3. Kristoph Naggert & Robert W. Rich & Joseph Tracy, 2023. "The Anchoring of US Inflation Expectations Since 2012," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2023(11), pages 1-7, July.
    4. Bems, Rudolfs & Caselli, Francesca & Grigoli, Francesco & Gruss, Bertrand, 2021. "Expectations' anchoring and inflation persistence," Journal of International Economics, Elsevier, vol. 132(C).
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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