Staff Working Paper No. 1,133
By Johannes J. Fischer, Christoph Herler and Philip Schnattinger
We study the causal effect of inflation uncertainty on household consumption and saving decisions. Using a representative household survey, we provide respondents with randomised information about the first and second moments of inflation forecasts to create exogenous variation in inflation uncertainty. Lower inflation uncertainty raises planned spending and expected income, but reduces expected interest rates and income uncertainty. This evidence is consistent with a reduction in precautionary saving. In the months following the treatment, households reduce their monthly savings, but report an increase in fixed-return asset holdings. Finally, households primarily attribute changes in inflation uncertainty to variation in supply-side shocks.
This version was updated in June 2026.
When the fog clears: the effect of reduced inflation uncertainty on households’ financial behaviour
