A new way to measure the drivers of consumer inflation expectations
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This article discusses a new approach to measuring the drivers of consumer inflation expectations. The Federal Reserve and other central banks are interested in understanding how households form their inflation expectations as it influences consumer and firm decision-making and monetary policy actions. The article describes two types of approaches that have been used to identify the causal drivers of consumer expectations: randomized control trials and event study analysis. The authors propose using the Survey of Consumer Expectations (SCE) data to conduct event study analysis, as it provides daily survey data from June 2013 to December 2021. The authors find that certain salient FOMC announcements and macroeconomic data releases have a substantial impact on inflation expectations. They also conduct statistical tests to determine which types of events generally affect consumer expectations. The article concludes by noting that the event study methodology can be used to study the effects of other types of news on expectations in the future.

#InflationExpectations #ConsumerExpectations #MonetaryPolicy #FederalReserve #EventStudyAnalysis

https://www.brookings.edu/articles/a-new-way-to-measure-the-drivers-of-consumer-inflation-expectations/