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MNI BRIEF: Core Drives Household Inflation Belief - Buba Study

Consumer price rises have greater effect on near-term household inflation expectations that headline shocks, Bundesbank paper finds

(MNI) London

Households are more likely to raise their near-term inflation expectations following upside shocks to core inflation than in response to a surprise increase in headline inflation uncertainty, a paper published by the Bundesbank Friday concludes.

“Shocks to headline inflation uncertainty seem to propagate through the same transmission channels as macroeconomic and financial uncertainty shocks,” the report authors write.

“By contrast, an unexpected rise in the uncertainty of core inflation has inflationary effects that resemble a positive aggregate demand shock. One possible reason why this occurs is that households significantly and quite persistently raise their near-term inflation expectations when faced with more volatile core consumer prices.”

MNI Frankfurt Bureau | +49-69-720-146 |
MNI Frankfurt Bureau | +49-69-720-146 |

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