Authors: Olivier Armantier, Gizem Kosar, Jason Somerville, Giorgio Topa, Wilbert van der Klaauw, and John C. Williams
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Staff Reports
The Curious Case of the Rise in Deflation Expectations
Number 1037
October 2022
October 2022
JEL classification: D12, D84, E31, E52
We study the behavior of U.S. consumers’ inflation expectations during the high inflation period of 2021-22 using data from the Survey of Consumer Expectations. Short- and, to a lesser extent, mediumterm inflation expectations rose as inflation surged in 2021. Disagreement and uncertainty about future inflation increased significantly. Then, in 2022, even as inflation continued to climb, medium- and longerterm inflation expectations unexpectedly fell and medium- and longer-term deflation expectations increased. We find that respondents with deflation expectations tend to expect prices to mean revert and are more optimistic about the economic outlook.
AUTHOR DISCLOSURE STATEMENT(S)
Olivier Armantier
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Gizem Kosar, Jason Somerville, Giorgio Topa, Wilbert van der Klaauw, and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Gizem Koşar
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Olivier Armantier, Jason Somerville, Giorgio Topa, Wilbert van der Klaauw, and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Jason Somerville
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations,” joint with Olivier Armantier, Gizem Kosar, Giorgio Topa, Wilbert van der Klaauw, and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Giorgio Topa
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Olivier Armantier, Gizem Kosar, Jason Somerville, Wilbert van der Klaauw, and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Wilbert van der Klaauw
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Olivier Armantier, Gizem Kosar, Jason Somerville, Giorgio Topa and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
John C. Williams
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Olivier Armantier, Gizem Kosar, Jason Somerville, Giorgio Topa and Wilbert van der Klaauw. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Gizem Kosar, Jason Somerville, Giorgio Topa, Wilbert van der Klaauw, and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Gizem Koşar
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Olivier Armantier, Jason Somerville, Giorgio Topa, Wilbert van der Klaauw, and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Jason Somerville
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations,” joint with Olivier Armantier, Gizem Kosar, Giorgio Topa, Wilbert van der Klaauw, and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Giorgio Topa
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Olivier Armantier, Gizem Kosar, Jason Somerville, Wilbert van der Klaauw, and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Wilbert van der Klaauw
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Olivier Armantier, Gizem Kosar, Jason Somerville, Giorgio Topa and John Williams. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
John C. Williams
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “The Curious Case of the Rise in Deflation Expectations," joint with Olivier Armantier, Gizem Kosar, Jason Somerville, Giorgio Topa and Wilbert van der Klaauw. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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