In 2022, consumer price inflation in the euro area has climbed to record highs. As a result, many households have increased their inflation expectations, thus increasing the risks of more persistent inflation in the future. Using the Bundesbank Online Panel Households as a laboratory, this column provides evidence that individuals who are shown ECB communication on the inflation outlook significantly reduce their inflation expectations. Furthermore, explaining the outlook verbally has a substantially larger effect than merely providing numerical projections.
Nothing contributes so much to the prosperity and happiness of a country as high profits