Title: Average inflation targeting and household expectations
Authors: Edward Knotek - Federal Reserve Bank of Cleveland (United States) [presenting]
Olivier Coibion - University of Texas-Austin (United States)
Yuriy Gorodnichenko - University of California-Berkeley (United States)
Raphael Schoenle - Federal Reserve Bank of Cleveland and Brandeis University (United States)
Abstract: Using a daily survey of U.S. households, we study how the Federal Reserve's announcement of its new strategy of average inflation targeting affected households expectations. Starting with the day of the announcement, there is a tiny uptick in the minority of households reporting that they had heard the news about monetary policy relative to before the announcement. Still, this effect fades within a few days. That hearing news about the announcement does not seem to have understood the announcement: they are no more likely to identify the Fed's new strategy than others correctly, nor are their expectations different. When we provide randomly selected households with pertinent information about average inflation targeting, their expectations still do not change differently than when households are provided with information about traditional inflation targeting.