Long-Run Inflation Expectations in the Shrinking Upper Tail
8 Pages Posted: 8 May 2019
Date Written: April 9, 2019
Consumer inflation expectations are highly disperse, with some households reporting very high inflation forecasts. In recent years, disagreement in longer-run inflation expectations has fallen, reflecting compression in the upper part of the distribution. The 75th percentile of the distribution of longer-run inflation forecast has fallen 0.21 percentage points per year since 2012 and is at an all-time low. I show that the decline in long-run inflation expectations at the upper end of the distribution seems to reflect improvement in consumers' general economic sentiment, rather than stronger anchoring of inflation expectations.
Keywords: consumer expectations, inflation expectations, anchoring, disagreement
JEL Classification: D83, D84, E31, E52
Suggested Citation: Suggested Citation