Inflation expectations and the great recession

14 March 2011

This article examines whether short-run inflation expectations and indicators of long-term credibility have been affected by the great recession and by the policies to counter it. Measures of short-run expectations dropped in the crisis, particularly in advanced economies, but have since rebounded. Measures of long-run inflation expectations have in general fluctuated around a relatively stable level, suggesting continued central bank credibility. At the same time, dispersion and uncertainty measures of long-term inflation expectations are somewhat higher than before the crisis, raising questions about how firmly expectations are anchored.

JEL classification: E31, E52