How are Households’ Inflation Expectations Formed?
5 Pages Posted: 18 Jul 2016
Date Written: July 12, 2016
Expectations about future inflation are an important factor determining current inflation and therefore the ability of the Monetary Policy Committee (MPC) to meet its 2% inflation target.
Households’ inflation expectations are informed by recent perceptions of inflation, particularly at shorter horizons. Wider macroeconomic factors, including the inflation target, also inform households’ inflation expectations, and more so at longer horizons.
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