We document novel survey-based facts about preferred long-run inflation rates among US consumers. Consumers on average prefer a 0.20% annual inflation rate, well below the Federal Reserve’s 2% target. Inflation preferences not only correlate with demographic and socioeconomic characteristics, but also with economic reasoning. A randomized control trial reveals that two narratives based on economic models—describing how inflation lowers the real value of wages and money holdings—affect inflation preferences. While our results can inform the design of central bank communication on inflation targets, they also raise questions about the alignment between such targets and consumer preferences.
Authors
European Central Bank, Afrouzi, Hassan, Dietrich, Alexander M, Myrseth, Kristian Ove R, Priftis, Romanos, Schoenle, Raphael S
Related Organizations
- Catalogue number
- QB-AR-24-074-EN-N
- Citation
- European Central Bank, Afrouzi, H., Dietrich, A., Myrseth, K. et al., Inflation preferences , European Central Bank, 2024, https://data.europa.eu/doi/10.2866/215385
- DOI
- https://data.europa.eu/doi/10.2866/215385
- ISBN
- 978-92-899-6767-9
- ISSN
- 1725-2806
- Pages
- 48
- Published in
- Belgium
- Themes
- Banks, insurance , Information technology and telecommunications
Table of Contents
- Inflation preferences 1
- Abstract 2
- Non-technical summary 3
- 1 Introduction 5
- 2 Survey 8
- 3 Determinants of inflation preferences 11
- 3.1 Demographic and socioeconomic determinants 11
- 3.2 Economic inflation models 12
- 4 Causal evidence: randomized control trial 14
- 5 Conclusion 18
- References 19
- Appendix 28
- A Additional figures and tables 28
- B Do consumers understand inflation? 33
- C Survey Appendix 35
- Acknowledgements & Imprint 48
