A note on the impact of news on US household inflation expectations

24 Sep 2020  ·  Ben Zhe Wang, Jeffrey Sheen, Stefan Trück, Shih-Kang Chao, Wolfgang Karl Härdle ·

Monthly disaggregated US data from 1978 to 2016 reveals that exposure to news on inflation and monetary policy helps to explain inflation expectations. This remains true when controlling for household personal characteristics, perceptions of government policy effectiveness, future interest rates and unemployment expectations, and sentiment. We find an asymmetric impact of news on inflation and monetary policy after 1983, with news on rising inflation and easier monetary policy having a stronger effect in comparison to news on lowering inflation and tightening monetary policy. Our results indicate the impact on inflation expectations of monetary policy news manifested through consumer sentiment during the lower bound period.

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