Inflation rates and short-term inflation expectations in the UK have increased significantly since 2021. This column uses quantitative and text data from the Decision Maker Panel to analyse the factors affecting inflation expectations at the firm level. It finds that firms' own price expectations are influenced by the labour market, input costs, energy, and, to a lesser extent, demand-side factors. Meanwhile, CPI expectations are dominated by energy cost considerations. Furthermore, it shows that the factors cited by firms are related in meaningful ways to their quantitative expectations.
Nicholas Bloom, Philip Bunn, Paul Mizen, Gregory Thwaites, Ivan Yotzov and Özgen Öztürk
8 December 2022
Vox EU
https://cepr.org/voxeu/columns/firm-inflation-expectations-quantitative-and-text-data
This work is published under POID and the CEP's Growth programme.