How Anchored Are Short-Run Inflation Expectations Today? A Look at What Consumers and Forecasters Are Telling Us

RePEc Short ID: pcl171
ORCID iD: 0009-0003-7577-4879

Cline, Alexander; Rich, Robert W.

doi:10.26509/frbc-ec-202601

Journal Article

How Anchored Are Short-Run Inflation Expectations Today? A Look at What Consumers and Forecasters Are Telling Us

Abstract: Policymakers emphasize the importance of “well-anchored” inflation expectations to ensure that price- and wage-setting behavior does not become entrenched in a high-inflation cycle, helping central banks to maintain price stability and achieve their inflation objectives. Motivated by concerns about trade tensions in the aftermath of high pandemic-era inflation, we examine the anchoring of consumers’ and professional forecasters’ one-year-ahead inflation expectations for evidence of recent weakening. While the inflation expectations of professional forecasters remain well-anchored, there has been a notable deterioration in consumers’ inflation expectations’ anchoring in 2025 comparable to that in the late 1970s.

https://doi.org/10.26509/frbc-ec-202601