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- Title
Assessing the risk to inflation from inflation expectations.
- Authors
Macallan, Clare; Taylor, Tim
- Abstract
Inflation expectations play an important role in the transmission mechanism of monetary policy. There is a risk that the periods of above-target CPI inflation in the past three years might cause inflation expectations to drift upwards. That might make inflation itself more persistent, via changes in price and wage-setting behaviour. And so, other things being equal, returning inflation to target would require tighter monetary policy. This article provides a framework that can be used to monitor the risk to inflation from inflation expectations. While recent developments provide few signs that the risk is materialising, the imperfect nature of data mean that the risk can be assessed only imperfectly.
- Subjects
PRICE inflation; MONETARY policy; CONSUMER price indexes; BUSINESS cycles; ECONOMIC models
- Publication
Bank of England Quarterly Bulletin, 2011, Vol 51, Issue 2, p100
- ISSN
0005-5166
- Publication type
Article