This box explores the factors shaping the euro area inflation expectations of firms in the survey on the access to finance of enterprises (SAFE). It finds that the short-term inflation expectations of firms are more volatile and closely tied to current inflation trends compared with their medium-term and long-term expectations. The determinants of these expectations considered in the analysis include the individual characteristics of firms, the sectors these operate in, their country of operation, their anticipated business decisions and euro area inflation. Among these factors, individual characteristics emerge as the primary driver of cross-section variation in inflation expectations of firms, followed by country-specific factors. At the same time, the uncertainty surrounding firms’ five-year inflation expectations is mainly influenced by the country in which they operate.
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