Inflation surprises and inflation expectations in the Euro area. Issue 6 (1st February 2019)

• Record Type: Journal Article
• Authors: Miccoli, Marcello; Neri, Stefano
• Is Part Of: Applied economics. Volume 51:Issue 6(2019)
• Page Start: 651
• Page End: 662
• Publication Date: 2019-02-01
• Subjects: Inflation -- inflation expectations -- inflation swap rates -- monetary policy; D84 -- E37 -- E31 -- E58; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2018.1506085
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: In the second half of 2012, euro area inflation started declining and reached historical lows at the end of 2014. Market-based measures of inflation expectations also declined to unprecedented levels. During this disinflationary period, inflation releases have often surprised analysts on the downside. We provide evidence that inflation 'surprises' have significant effects on inflation expectations. The sensitivity of inflation expectations to the surprises, which has varied over time, disappeared after the introduction of the Asset Purchase Programme by the European Central Bank.