How Has the Risk to Inflation from Inflation Expectations Evolved?

10 Pages Posted: 6 Jul 2012

Date Written: June 20, 2012

Abstract

During 2011, the Monetary Policy Committee expressed concern that persistently above-target outturns of CPI inflation might lead to inflation expectations becoming less well anchored by monetary policy. And in turn, that could make inflation itself more persistent via changes in price-setting or wage-setting behaviour. But inflation is now more than 2 percentage points lower than in September 2011. In light of that, this article discusses recent movements in inflation expectations and looks at a range of indicators to assess how the risk to inflation from expectations has evolved. While the upside risk has receded a little relative to the 2010–11 H1 period, so long as inflation is above target, some risk remains.

Suggested Citation

Harimohan, Rashmi, How Has the Risk to Inflation from Inflation Expectations Evolved? (June 20, 2012). Bank of England Quarterly Bulletin 2012 Q2, Available at SSRN: https://ssrn.com/abstract=2101082

Rashmi Harimohan (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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