ECB says new data highlights stabilising effect of inflation expectations

Research from the European Central Bank presents new evidence to support an important assumption that economists make about inflation expectations.

“Economists have argued that when interest rates set by policy-makers cannot go any lower, the economy can be stabilised if consumers expect the rate of inflation to increase,” say Ioana Duca-Radu, Geoff Kenny and Andreas Reuter. “Yet the evidence for this stabilising effect has been very mixed.”

Their paper Can consumers’ inflation expectations