By Gareth Anderson and Becky Maule of the Bank’s Monetary Assessment and Strategy Division.
Well-anchored inflation expectations play an important role in the achievement of the Monetary Policy Committee’s (MPC’s) 2% inflation target. At the moment, available measures are consistent with inflation expectations remaining well anchored to the MPC’s target. Empirical work suggests that unexplained ‘shocks’ to households’ expectations may have had a significant impact on inflation over the past.
Assessing the risk to inflation from inflation expectations