Rising inflation is worrisome. But not for the reasons you think by Francesco D’Acunto, Michael Weber published by VOXEU (1/2022).
Commentators and policymakers are deeply divided about the causes, consequences, and persistence of the surge in inflation around the world as the economic activities resume after the COVID-19-induced closures. This column discusses how recent research on the dynamics of inflation and inflation expectations inform the policy debate. Consumers’ inflation expectations are an important missing piece in the puzzle policymakers are trying to solve. To avoid the self-fulfilling prophecy of inflation, central bankers might seek to communicate directly also with ordinary consumers, rather than only with financial market experts, and convince them that price increases will only be temporary.]
