The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.
Using the panel component of the Michigan Survey of Consumers, we estimate a learning model of inflation expectations, allowing for heterogeneous use of both private information and lifetime inflation experience. “Life-experience inflation” has a significant impact on individual expectations, but only for one-year-ahead inflation. Public information is substantially more relevant for longer-horizon expectations. Even controlling for life-experience inflation and public information, idiosyncratic information explains a nontrivial proportion of the inflation forecasts of agents. We find that women, ethnic minorities, and less educated agents—groups with perennially high inflation expectations—have a higher degree of heterogeneity in their idiosyncratic information and give less importance to recent movements in inflation. During the 1990s and early 2000s, consumers have believed inflation to be more persistent in the short term. However, quarterly inflation fluctuations have a smaller effect on long-term inflation expectations, especially in recent years, suggesting that agents believe shocks to be temporary.