Inflation expectations are less important than you may think
klementoninvesting.substack.com
A while ago I wrote about the sensational paper by Jeremy Rudd who thoroughly criticized the common belief in the importance of inflation expectations for inflation and monetary policy. In short, central banks focus on keeping inflation expectations “well-anchored” around the long-term inflation target, fearing that if inflation expectations move higher, consumers will demand higher wages and ignite a wage-price spiral. Yet, the empirical evidence for the relevance of inflation expectations is rather weak and today, I want to discuss two recent research projects into that topics and what they mean for our belief in the importance of inflation expectations.
Inflation expectations are less important than you may think
Inflation expectations are less important…
Inflation expectations are less important than you may think
A while ago I wrote about the sensational paper by Jeremy Rudd who thoroughly criticized the common belief in the importance of inflation expectations for inflation and monetary policy. In short, central banks focus on keeping inflation expectations “well-anchored” around the long-term inflation target, fearing that if inflation expectations move higher, consumers will demand higher wages and ignite a wage-price spiral. Yet, the empirical evidence for the relevance of inflation expectations is rather weak and today, I want to discuss two recent research projects into that topics and what they mean for our belief in the importance of inflation expectations.