March 2015

Consumers' Attitudes and Their Inflation Expectations

Michael Ehrmann, Damjan Pfajfar, and Emiliano Santoro


This paper studies consumers' inflation expectations using micro-level data from the Surveys of Consumers conducted by University of Michigan. It shows that beyond the well-established socio-economic factors such as income, age or gender, other characteristics such as the households' financial situation and their purchasing attitudes are important determinants of their forecast accuracy. Respondents with current or expected financial difficulties, pessimistic attitudes about major purchases, or expectations that income will go down in the future have a stronger upward bias in their expectations than other households. However, their bias shrinks by more than that of the average household in response to increasing media reporting about inflation. Equivalent results are found during recessions.

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Keywords: Consumer Attitudes, Inflation Expectations, News on Inflation


PDF: Full Paper

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Last Update: June 19, 2020