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Working Paper
The Effects of Interest Rate Increases on Consumers' Inflation Expectations: The Roles of Informedness and Compliance
We study how monetary policy communications associated with increasing the federal funds rate causally affect consumers' inflation expectations. In a large-scale, multi-wave randomized controlled trial (RCT), we find weak evidence on average that communicating policy changes lowers consumers' medium-term inflation expectations. However, information differs systematically across demographic groups, in terms of ex ante informedness about monetary policy and ex post compliance with the information treatment. Monetary policy communications have a much stronger effect on people who had not ...
Journal Article
The Survey of Firms’ Inflation Expectations
The inflation expectations of individuals who lead firms can influence the prices that their firms charge customers and hence can influence overall inflation. This Economic Commentary summarizes results from the Survey of Firms’ Inflation Expectations (SoFIE), which asks top business executives for their inflation expectations once per quarter alongside a second question from a rotating set. We document that this group’s inflation expectations increased with the run-up in inflation over 2021 and 2022 but then began to decline in early 2023. The Cleveland Fed will post estimates from the ...
Working Paper
Practice Makes Perfect: Learning Effects with Household Point and Density Forecasts of Inflation
This paper shows how both the characteristics and the accuracy of the point and density forecasts from a well-known panel data survey of households' inflationary expectations – the New York Fed's Survey of Consumer Expectations – depend on the tenure of survey respondents. Households' point and density forecasts of inflation become significantly more accurate with repeated practice of completing the survey. These learning gains are best identified when tenure-based combination forecasts are constructed. Tenured households on average produce lower point forecasts of inflation, perceive ...