Consumer Inflation Expectations Associated With Age and Income
Euro area consumers tend to have a positive bias in their perception of inflation, according to an analysis released today, which concludes that inflation expectations increase with age and decrease with income.
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Economia Estudo
Prepared based on data from April 2020 to December 2023, the analysis of the results of the Consumers Expectations Survey (CES) by the European Central Bank (ECB) regarding perceptions and inflation expectations still indicates a link between inflation perceptions and observed inflation and a relationship between inflation expectations on the one-year horizon that are related and past expectations.
Inflation expectations (the rate at which economic agents expect prices to rise in the future) are indicated in the analysis - prepared by Sandra Gomes, Nuno Monteiro and Pedro Pires Ribeiro and published in the Economic Studies Journal of the Banco de Portugal (BdP) - as central to macroeconomic theory, since they influence future decisions.
Additionally, the expectations of participants in financial markets have an immediate impact on asset prices, which is why inflation expectations are considered an important part of the information that guides monetary policy authorities in pursuing their objective of price stability.
In the analysis now released, the authors conclude that "consumers in the euro area tend to present a positive bias in relation to observed inflation, both in their perceptions and in their expectations".
"Furthermore, our empirical conclusions reveal a link between inflation perceptions and observed inflation, and that inflation expectations with a one-year horizon are related to past expectations, inflation perceptions and the social and demographic characteristics of individuals (such as age and income level)", they argue.
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