Average Inflation Targeting and Household Expectations

Olivier Coibion · Yuriy Gorodnichenko · Edward S. Knotek · Raphael Schoenle

61 citations0/0 files storedJournal of Political Economy Macroeconomics

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Monetary Policy and Economic Impact Financial Literacy, Pension, Retirement Analysis Economic theories and models

Abstract

Using a daily survey of US households, we study how the Federal Reserve’s announcement of its new strategy of average inflation targeting affected households’ expectations. Starting with the day of the announcement, there is a small uptick in the minority of households reporting that they had heard news about monetary policy, but this effect fades within a few days. Those who heard news about the announcement do not seem to have understood the announcement. When provided with pertinent information about the new policy, households do not change their expectations. These patterns continue to hold 1 year after the announcement.

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References

2023Designing Information Provision Experiments 2022Monetary Policy Communications and Their Effects on Household Inflation Expectations 2017Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments 2020Coronavirus Fears and Macroeconomic Expectations 2019How Do Expectations about the Macroeconomy Affect Personal Expectations and Behavior?2014The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment 2015Inflation Targeting Does Not Anchor Inflation Expectations: Evidence from Firms in New Zealand 2019Central bank announcements: Big news for little people?

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