Perceptions and Expectations of Inflation by U.S. Households

29 Pages Posted: 27 Nov 2018 Last revised: 21 Feb 2019

See all articles by Sandor Axelrod

Sandor Axelrod

University of Oxford

David E. Lebow

U.S. Federal Reserve Board - Macroeconomic Analysis Section

Ekaterina Peneva

Board of Governors of the Federal Reserve System

Date Written: 2018-10-25

Abstract

To better understand inflation expectations, we examine newly available data on U.S. households' inflation perceptions-what people think inflation has been in the past. The overarching summary is that inflation perceptions look similar to inflation expectations. The central tendencies of the responses for perceived inflation over the past five to ten years are similar to those of expected inflation for the next five to ten years, and all are a little above official estimates of inflation. Thus, survey respondents overall do not expect long-term inflation to change in the future relative to the recent past. Moreover, individuals who perceive higher inflation in the past tend to expect higher inflation in the future; people whose perceptions change tend to revise their expectations in the same direction; and perceptions and expectations vary similarly by gender and income. These results suggest that if inflation perceptions were to change, they could lead inflation e xpectations to change as well.

Keywords: Consumer surveys, Inflation dynamics, Inflation expectations, Inflation perceptions

JEL Classification: D84, E31

Suggested Citation

Axelrod, Sandor and Lebow, David E. and Peneva, Ekaterina, Perceptions and Expectations of Inflation by U.S. Households (2018-10-25). FEDS Working Paper No. 2018-073. Available at SSRN: https://ssrn.com/abstract=3286483 or http://dx.doi.org/10.17016/FEDS.2018.073

Sandor Axelrod (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

David E. Lebow

U.S. Federal Reserve Board - Macroeconomic Analysis Section ( email )

20th & C. St., N.W.
Mailstop 80
Washington, DC 20551
United States
202-452-3057 (Phone)
202-452-3819 (Fax)

Ekaterina Peneva

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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