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Discussion Paper
Creating a History of U.S. Inflation Expectations
Middeldorp, Menno; Groen, Jan J. J. (2013-08-21)
Central bankers closely monitor inflation expectations because they?re an important determinant of actual inflation. Treasury inflation-protected securities (TIPS) are commonly used to measure bond market inflation expectations. Unfortunately, they were only introduced in 1997, so historical data are limited. We propose a solution to this problem by using the relationship between TIPS yields and other data with a longer history to construct synthetic TIPS rates going back to 1971.
Liberty Street Economics , Paper 20130821

Working Paper
Assessing Abenomics: Evidence from Inflation-Indexed Japanese Government Bonds
Christensen, Jens H. E.; Spiegel, Mark M. (2019-10-15)
We assess the impact of news concerning the reforms associated with ?Abenomics? using an arbitrage-free term structure model of nominal and real yields. Our model explicitly accounts for the deflation protection enhancement embedded in Japanese inflation-indexed bonds issued since 2013, which pay their original nominal principal when deflation has occurred from issue to maturity. The value of this enhancement is sizable and time-varying, with substantive impacts on estimates of expected inflation compensation. After properly accounting for deflation protection, our results suggest that ...
Working Paper Series , Paper 2019-15

Working Paper
Thinking Outside the Box: Do SPF Respondents Have Anchored Inflation Expectations?
Janson, Wesley; Binder, Carola; Verbrugge, Randal (2019-08-20)
Despite the stability of the median 10-year inflation expectations in the Survey of Professional Forecasters (SPF) near 2 percent, we show that not a single SPF respondent?s expectations have been anchored at the target since the Federal Open Market Committee?s (FOMC) enactment of an inflation target in January 2012, or even since 2015. However, we find significant evidence for ?delayed anchoring,? or a move toward being anchored, particularly after the federal funds rate lifted off in December 2015.
Working Papers , Paper 19-15

Working Paper
Inflation Expectations and the News
Bauer, Michael D. (2014-03-27)
This paper provides new evidence on the importance of inflation expectations for variation in nominal interest rates, based on both market-based and survey-based measures of inflation expectations. Using the information in TIPS breakeven rates and inflation swap rates, I document that movements in inflation compensation are important for explaining variation in long-term nominal interest rates, both unconditionally as well as conditionally on macroeconomic data surprises. Daily changes in inflation compensation and changes in long-term nominal rates generally display a close statistical ...
Working Paper Series , Paper 2014-9

Discussion Paper
New SCE Charts Include a Measure of Longer-Term Inflation Expectations
Aidala, Felix; Armantier, Olivier; Boumahdi, Fatima-Ezzahra; Koşar, Gizem; Lall, Devon; Somerville, Jason; Topa, Giorgio; Van der Klaauw, Wilbert (2022-10-11)
Today, the New York Fed introduces several new data series and interactive charts depicting findings from its Survey of Consumer Expectations (SCE). The SCE is a representative, internet-based monthly survey of a rotating panel of about 1,300 household heads in the United States. Since January 2014, we have been reporting findings from our monthly survey on U.S. households’ views on inflation, household income and spending growth, their expectations about the housing and labor market, and a range of other expectations about the economy and outcomes for their own household. In addition to ...
Liberty Street Economics , Paper 20221011

Briefing
Inflation Expectations and Price Setting Among Fifth District Firms
Schwartzman, Felipe; Waddell, Sonya Ravindranath (2024-01)
Evidence from a Federal Reserve Fifth District survey indicates that businesses become more reactive to inflation as it rises, but much of that reactivity reverses as inflation ebbs. Moreover, the survey indicates that inflation expectations matter to how most firms set their prices. How much inflation expectations matter and for whom they matter are essential questions for policymakers as they seek to maintain price stability.
Richmond Fed Economic Brief , Volume 24 , Issue 03

Working Paper
Household Inflation Expectations and Consumer Spending: Evidence from Panel Data
Burke, Mary A.; Ozdagli, Ali K. (2020-01-01)
Recent research offers mixed results concerning the relationship between inflation expectations and consumption, using qualitative measures of readiness to spend. We revisit this question using survey panel data from the United States of actual spending from 2009 through 2012 that also allow us to control for household heterogeneity. We find that durables spending increases with inflation expectations only for certain types of households, while nondurables spending does not respond to inflation expectations. Moreover, spending decreases with an expected increase in unemployment. These results ...
Working Papers , Paper 20-15

Journal Article
Are Inflation Expectations Well Anchored in Mexico?
Beauregard, Remy; Christensen, Jens H. E.; Fischer, Eric; Zhu, Simon (2023-01-17)
Price inflation has increased sharply since early 2021 in many countries, including Mexico. If sustained, high inflation in Mexico could raise questions about the ability of its central bank to bring inflation down to its 3% inflation target. However, analyzing the difference between market prices of nominal and inflation-indexed government bonds suggests investors’ long-term inflation expectations in Mexico are close to the central bank’s inflation target and are projected to remain so in coming years.
FRBSF Economic Letter , Volume 2023 , Issue 01 , Pages 6

Working Paper
Anchored Inflation Expectations and the Slope of the Phillips Curve
Jorgensen, Peter; Lansing, Kevin J. (2019-11-06)
We estimate a New Keynesian Phillips curve that allows for changes in the degree of anchoring of agents' subjective inflation forecasts. The estimated slope coefficient in U.S. data is stable over the period 1960 to 2019. Out-of-sample forecasts with the model resolve both the "missing disinflation puzzle" during the Great Recession and the "missing inflation puzzle" during the subsequent recovery. Using a simple New Keynesian model, we show that if agents solve a signal extraction problem to disentangle transitory versus permanent shocks to inflation, then an increase in the policy rule ...
Working Paper Series , Paper 2019-27

Report
How Economic Crises Affect Inflation Beliefs: Evidence from the COVID-19 Pandemic
Van der Klaauw, Wilbert; Smith, Kyle; Pomerantz, Rachel; Topa, Giorgio; Armantier, Olivier; Koşar, Gizem; Skandalis, Daphne (2020-11-01)
This paper studies how inflation beliefs reported in the New York Fed’s Survey of Consumer Expectations have evolved since the start of the COVID-19 pandemic. We find that household inflation expectations responded slowly and mostly at the short-term horizon. In contrast, the data reveal immediate and unprecedented increases in individual inflation uncertainty and in inflation disagreement across respondents. We find evidence of a strong polarization in inflation beliefs and we show differences across demographic groups. Finally, we document a strong link, consistent with precautionary ...
Staff Reports , Paper 949

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