Are all forecasters the same? Expectations models incorporating information rigidities typically imply that forecasters are interchangeable, which predicts an absence of systematic patterns in individual forecast behavior. Motivated by this prediction, we examine the European Central Bank's Survey of Professional Forecasters and find, in contrast, that participants display systematic patterns in predictive performance both within and across target variables. Moreover, we document a new result from professional forecast surveys, which is that inter- and intra-forecaster relative predictive performance are strongly linked to the degree of difficulty in the forecasting environment. This insight can inform the ongoing development of expectations models. (c) 2025 International Institute of Forecasters. Published by Elsevier B.V. All rights are reserved, including those for text and data mining, AI training, and similar technologies.

Policymakers emphasize the importance of "well-anchored" inflation expectations to ensure that price- and wage-setting behavior does not become entrenched in a high-inflation cycle, helping central banks to maintain price stability and achieve their inflation objectives. Motivated by concerns about trade tensions in the aftermath of high pandemic-era inflation, we examine the anchoring of consumers' and professional forecasters' one-year-ahead inflation expectations for evidence of recent weakening. While the inflation expectations of professional forecasters remain well-anchored, there has been a notable deterioration in consumers' inflation expectations' anchoring in 2025 comparable to that in the late 1970s.

Previous studies have ascribed the modest procyclicality of average hourly earnings growth to composition bias. These studies argue that by placing more weight on low-skill workers during expansions than during recessions, average hourly earnings growth generates a downward bias in estimated cyclicality. This paper uses data from the Survey of Income and Program Participation to document that this downward bias is, instead, the consequence of an aggregation effect that involves a relative-earnings weighting of individual wage growths. We also find that the aggregation effect largely accounts for the lower level of average hourly earnings growth as compared to other aggregate wage growth measures.

The Survey of Firms' Inflation Expectations (SoFIE) is a quarterly survey of chief executive officers and other top business executives in the United States that collects information about their inflation expectations. This Economic Commentary presents questions newly introduced to SoFIE—some related to inflation and others examining expectations for prices, costs, employment, and wages—and provides initial analysis of the collected responses. The expanded set of survey results will be updated on a quarterly basis on the Federal Reserve Bank of Cleveland's website at clefed.org/SoFIE.

This Economic Commentary studies the degree of anchoring of US firms' inflation expectations from 2018 to 2025 by leveraging a novel survey of firms' medium-term inflation expectations and their subjective perceptions of the Federal Open Market Committee's (FOMC) inflation objective. We capture unanchoring by measuring disagreement across firms' expectations and the misalignment between the mean of firms' expectations and the FOMC's inflation objective. Based on our measure, the anchoring of firms' medium-term inflation expectations weakened significantly during the pandemic inflation surge, driven largely by an increase in disagreement but also by firms' subjective perceptions of the FOMC's inflation objective's temporarily deviating from 2 percent. While we find anchoring has significantly strengthened since 2022, it remained somewhat weaker during 2025 than the prepandemic average.

We implement a novel methodology to disentangle two-way causality in inflation and income expectations in a large, nationally representative survey of US consumers. We find a 20 percent passthrough from expected inflation to expected income growth, but no statistically significant effect in the other direction. Passthrough is higher for higher-income individuals and men. Higher inflation expectations increase consumers’ likelihood to search for higherpaying new jobs. In a calibrated search-and-matching model, dampened responses of wages to demand and supply shocks translate into greater output fluctuations. The survey results and model analysis provide a labor market channel for why people dislike inflation.

There has been a lot of interest in firms’ pricing decisions in the past few years—both during the inflation surge of 2021-23 and in the more recent rounds of tariff increases. In this post, we let firms speak for themselves about what factors they consider when adjusting prices in response to various shocks. The analysis is based on an ongoing research project, joint with the Atlanta and Cleveland Federal Reserve Banks, on how businesses set prices and the extent of passthrough of cost increases. In particular, we leverage the qualitative portion of the study based on open-ended interviews with senior decision-makers on how they approach pricing decisions in their firms. Rather than a uniform approach, a very nuanced picture emerges of businesses trying to balance competing objectives while keeping an eye on demand conditions for their products as well as on their direct competitors’ behavior in the market.

Productivity growth has shown a notable pickup since the fourth quarter of 2019, and some commentators cite artificial intelligence and other factors as reasons why technological progress can sustain this faster pace. Motivated by this consideration, we use a model designed to detect trend shifts to examine the behavior of productivity growth in the postwar period. The model allows for shifts between high- and low-growth productivity regimes and estimates the probability of being in one regime or the other. We find that recent data provide tentative support for a higher trend growth rate, with the model estimating about a 40 percent probability that the economy is in a high-growth productivity regime.

Following Manzan (2021), this paper examines how professional forecasters revise their fixed-event uncertainty (variance) forecasts and tests the Bayesian learning prediction that variance forecasts should decrease as the horizon shortens. We show that Manzan's (2021) use of first moment “efficiency” tests are not applicable to studying revisions of variance forecasts. Instead, we employ monotonicity tests developed by Patton and Timmermann (2012) in our first known application of these tests to second moments of survey expectations. We find strong evidence that the variance forecasts are consistent with the Bayesian learning prediction of declining monotonicity.

Based on indirect utility theory, we ask consumers about the change in their incomes that would be required to offset expected price changes and buy the same amounts of goods and services one year ahead in a large-scale, high-frequency survey of consumers in the US and 14 other countries. Aggregating responses across consumers provides an alternative, indirect measure of inflation expectations compared with conventional, direct measures, but with theoretically lower ex-post forecast errors. The survey responses show that indirect consumer inflation expectations vary based on age, gender, individual inflation experiences, and local shocks. Exploiting rich cross-sectional variation, inflation expectations increase by slightly more in response to gasoline price changes than implied by their expenditure share.

We examine businesses’ price-setting practices via open-ended interviews and in a quantitative survey module with business contacts from the Federal Reserve Banks of Atlanta, Cleveland, and New York in December 2022 and January 2023. Businesses indicated that their prices were strongly influenced by demand, a desire to maintain steady profit margins, and wages and labor costs. Survey respondents expected reduced growth in costs and prices of about 5 percent on average over the next year. Backward-looking, forward-looking, and hypothetical scenarios reveal average cost-price passthrough of around 60 percent, with meaningful heterogeneity across firms.

This paper introduces a novel measure of consumer inflation expectations: We elicit and combine inflation forecasts across categories of personal consumption expenditure to form an aggregated measure of inflation expectations. Drawing on nearly 60,000 respondents, our data comprise the early low-inflation environment of the COVID pandemic and the 2021 inflation surge. Conventionally elicited inflation expectations consistently exceed aggregated measures constructed under plausible weighting schemes. Aggregated measures display less disagreement and volatility and are stronger predictors of consumers’ spending plans. The relative informational value of aggregated measures rises with the individual-level gap between conventional and aggregated inflation expectations. Our results chart a new course for designing measurement of inflation expectations.

The stabilization, or anchoring, of inflation expectations at a target can help a central bank meet its goals. This paper develops a measure of expectations’ anchoring that combines the deviation of a consensus forecast from an inflation target with forecaster disagreement. We apply the measure to survey-based forecasts of PCE price inflation at medium- and longer-run horizons. Following the FOMC’s 2012 announcement of a 2 percent inflation target, the anchoring of both forecast series steadily improved through 2020:Q4. Recently, while longer-run expectations have remained well-anchored, the anchoring of medium-run expectations weakened significantly during the pandemic before strengthening in 2023:Q1.

This chapter provides an overview of surveys of professional forecasters, with a focus on the U.S. Survey of Professional Forecasters and the European Central Bank Survey of Professional Forecasters. A distinguishing feature of these surveys is that they collect point and density forecasts and make the data publicly available. We discuss their structure, issues involved in using the data, and the construction of measures such as disagreement and uncertainty at the aggregate and individual levels. Our review also summarizes the findings of studies exploring issues such as the alignment of point forecasts with measures of central tendency from associated density forecasts, the coverage of density forecasts, the rounding of point and density forecasts, comparisons of forecast accuracy across respondents, and heterogeneity in forecast behavior and the persistence of these differential features. We conclude with some observations for future work.

Surveys often measure consumers’ inflation expectations by asking directly about prices in general or overall inflation, concepts that may not be well-defined for some individuals. In this Commentary, we propose a new, indirect way of measuring consumer inflation expectations: Given consumers’ expectations about developments in prices of goods and services during the next 12 months, we ask them how their incomes would have to change to make them equally well-off relative to their current situation such that they could buy the same amount of goods and services as they can today. Using a massive number of survey responses at a high frequency, we show that this measure of indirect consumer inflation expectations has risen sharply since early 2021. Higher inflation experiences correlate with higher indirect consumer inflation expectations across US cities and around the world.

Based on indirect utility theory, we introduce a novel methodology of measuring inflation expectations indirectly. This methodology starts at the individual level, asking consumers about the change in income required to buy the same amounts of goods and services one year ahead. Analytically, our methodology possesses smaller ex-post aggregate inflation forecast errors relative to forecasts based on conventional survey questions. We ask this question in a large-scale, high-frequency survey of consumers in the US and 14 countries, and we show that indirect consumer inflation expectations perform well along several empirical dimensions. Exploiting the geographically detailed, high-frequency variation in the data, we then show that individual experiences matter for inflation expectations, in a nuanced way. For example, age and gender have different effects internationally, while individual inflation and local experiences are generally highly relevant. In an application to gasoline price changes, we identify large effects of experienced gasoline price changes on inflation expectations, characterized by both overreaction and persistence.

This paper focuses on the implications of alternative methods of aggregating individual wage data for the behavior of economy-wide wage growth. The analysis is motivated by evidence of significant heterogeneity in individual wage growth and its cyclicality. Because of this heterogeneity, the choice of aggregation will affect the properties of economy-wide wage growth measures. To assess the importance of this consideration, we provide a decomposition of wage growth into aggregation effects and composition effects and use the decomposition to compare growth in an average wage—specifically average hourly earnings—to a measure of average wage growth from the Survey of Income and Program Participation. We find that aggregation effects largely account for average hourly earnings growth being persistently lower and less cyclical than average wage growth over the period 1990-2015, with these effects reflecting a disproportionate weighting of high-earning workers. The analysis also indicates that composition effects now play a more limited role in the cyclicality of wage growth compared to results reported in previous studies for earlier time periods.

Median and trimmed-mean inflation rates tend to be useful estimates of trend inflation over long periods, but they can exhibit persistent departures from the underlying trend over shorter horizons. In this Commentary, we document that the extent of this bias is related to the degree of skewness in the distribution of price changes. The shift in the skewness of the cross-sectional price-change distribution during the pandemic means that median PCE and trimmed-mean PCE inflation rates have recently been understating the trend in PCE inflation by about 15 and 35 basis points, respectively.

To provide insights into the processes that drive inflationary dynamics, the Federal Reserve Bank of Cleveland holds an annual conference on the topic of inflation: the Inflation: Drivers and Dynamics series. The 2020 installment of the conference was held on May 21-22, 2020. This Commentary summarizes the papers at the conference, which broadly fell into four categories: (1) empirical Phillips curves, (2) networks and Phillips curves, (3) expectations formation, and (4) price-setting behavior and inflation.

The Cleveland Fed’s Center for Inflation Research sponsored a session on inflation dynamics at the 2020 CEBRA annual meeting. The presentations focused on inflation expectations and firms’ price-setting behavior. This Economic Commentary summarizes the papers presented during the session.