How are households' inflation expectations formed?

Quarterly Bulletin 2016 Q2
Published on 12 July 2016

By Jeremy RoweMost important factors reported as determining inflation expectations

Expectations about future inflation are an important factor determining current inflation and therefore the ability of the Monetary Policy Committee (MPC) to meet its 2% inflation target.

Households’ inflation expectations are informed by recent perceptions of inflation, particularly at shorter horizons. Wider macroeconomic factors, including the inflation target, also inform households’ inflation expectations, and more so at longer horizons.

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