Inflation

Post n°307

Central banks’ announcements and market inflation expectations

Published on 03/07/2023

Share links

By Sophie Guilloux-Nefussi, Cristina Jude, Adrian Penalver, Urszula Szczerbowicz

This post investigates how monetary policy announcements in the US and the euro area have affected inflation expectations since 2021. We show that a 100bp surprise increase in 2-year rates translated into a 30-50bp drop in medium-term inflation expectations. Central banks’ effective communication was the main factor influencing inflation expectations around these announcements.

Figure 1: Response of inflation expectations to a 100bp monetary policy surprises in 2021-2023
Figure 1: Response of inflation expectations to a 100bp monetary policy surprises in 2021-2023 Source: Bloomberg and authors calculations
Updated on 03/07/2023 08:33
Post n°299

New indicators of perceived inflation in France based on media data

Published on 12/27/2022

Share links

By Jean-Charles Bricongne, Olivier de Bandt, Annabelle de Gaye, Julien Denes, Paul Hubert, Pierre-Antoine Robert

The recent rise in inflation could affect households' and businesses' perception of inflation. This post describes new indicators of perceived inflation in France constructed from alternative data: newspaper articles and messages from the social network Twitter. The advantage of such data is that they are available at high frequency and in real time.

Chart 1. Indicators of perceived inflation based on media data (standardised and rescaled) Sources: Factiva, Twitter, European Commission, authors' calculations.
Updated on 12/27/2022 09:49
Post n°298

Dynamics and Implications of the Recent Rise in Wheat Prices

Published on 12/23/2022

Share links

By Raj Rajesh, Paul Vertier, Thibault Lemaire, Arthur Stalla-Bourdillon, and Aude Le Metayer

The increase in global wheat prices in the last two years, especially after the start of the Ukraine war, reflects a strong market integration and a high dependence on energy and fertiliser prices. As several developing countries depend on a small number of wheat exporters, curbing food insecurity will require coordinated action and crop diversification.

Chart 1: International export prices (free on board) of wheat in different markets
Chart 1: International export prices (free on board) of wheat in different markets Source: FAO
Updated on 12/23/2022 14:00
Post n°290

The pass-through of commodity prices to inflation in Africa

Published on 11/10/2022

Share links

By Thibault Lemaire and Paul Vertier

The rise in world commodity prices since mid-2020 has fuelled inflation in Africa. A new estimation strategy shows a pass-through of about 30% from commodity prices to consumer prices on the continent, which is higher than existing estimates. The impact is greater in low-income countries and in those countries where the food share in the consumption basket is the largest.

Chart 1: Impact of a 1% rise in commodity prices on consumer prices in Africa
Chart 1: Impact of a 1% rise in commodity prices on consumer prices in Africa Source: Authors’ calculations based on the local projection method. Data from the World Bank, International Monetary Fund (IMF), International Disaster Database (EM-DAT), and Armed Conflict Location and Event Data Project (ACLED).
Updated on 11/10/2022 16:59
Post n°285

What lessons from US evidence on the heterogeneity in inflation expectations?

Published on 10/07/2022

Share links

By Camille Cornand (Univ Lyon, CNRS, GATE), Paul Hubert

Monetary policy consists in part in managing inflation expectations of different agents. New US evidence on heterogeneous frequency of forecast revisions and disagreement among various categories of agents (households, firms, professional forecasters) suggests that targeting communication to specific groups could be a useful tool for central bankers.

Figure 1 – Distribution of inflation expectations in the US
Figure 1 – Distribution of inflation expectations in the US Source: authors’ computations.
Updated on 10/07/2022 08:26
Post n°275

What are business leaders’ inflation expectations?

Published on 06/23/2022

Share links

By Paul Bouche, Julien Demuynck, Erwan Gautier, Frédérique Savignac

For the first time, the Banque de France is publishing the results of a survey on business leaders’ inflation expectations, collected since the end of 2021. One-year inflation expectations have increased since the beginning of the year and their median stands at 5% in the second quarter of 2022. Longer-term expectations (3-5 years) are also rising, but more slowly, with a median of 3%. This survey was conducted prior to the ECB's monetary policy normalisation announced on 9 June, which is expected to contribute to the gradual "re-anchoring" of inflation expectations.

Chart 1: Changes in inflation expectations since end-2021 in France (median in %)
Chart 1: Changes in inflation expectations since end-2021 in France (median in %) Note: median weighted by the number of employees in the company and the value added in the company's sector, 1% of the highest responses are not taken into account in the calculations. Source: IE-Banque de France survey.
Updated on 06/23/2022 16:33
Post n°268

How much have rising transport costs affected US import prices?

Published on 05/11/2022

Share links

By Sebastian Stumpner

This blog post examines to what extent the recent surge in international transport costs has fuelled US import price inflation. While we find a moderate effect at the aggregate level, there are significant differences across products that are largely driven by the degree of containerisation.

Chart 1: The share of transport costs has increased only for containerised goods
Chart 1: The share of transport costs has increased only for containerised goods Source: Author’s calculations based on data from TradeDataMonitor.
Updated on 05/11/2022 18:19
Post n°261

Advantages of point targets and drawbacks of target ranges

Published on 03/15/2022

Share links

By Christoph Grosse Steffen and Magali Marx

A central bank’s inflation objective can be formulated using a point target, a target range or a combination of the two. In this blog, we show the disadvantages of a target range for anchoring inflation expectations and for macroeconomic stabilisation. The analysis thereby underpins the ECB’s adoption of a clear and symmetric 2% inflation point target.

Chart 1: Inflation objectives, Q2 2020
Chart 1: Inflation objectives, Q2 2020 Source: Central bank websites, authors’ illustration.
Updated on 03/15/2022 17:33
Post n°233

How do oil prices pass through to fuel prices?

Published on 10/14/2021

Share links

By Erwan Gautier, Magali Marx and Paul Vertier

A 1% increase in the price of imported refined diesel ultimately translates into a 0.75% increase in the pre-tax price and a 0.3% increase in the pump price of diesel including taxes in France. The adjustment does not occur immediately but is rapid: after one week, the increase in the pre-tax price is 0.45%, i.e. more than 50% of the final pass-through. Prices respond in the same way to an upward or downward shock.

Chart 1: Response of diesel prices to a 1% shock in the commodity cost
Chart 1: Response of diesel prices to a 1% shock in the commodity cost Sources: Ministry for the Ecological and Solidarity Transition, Reuters. Authors' calculations.
Updated on 10/14/2021 18:00
Post n°232

Is the rise in French inflation temporary?

Published on 10/13/2021

Share links

By Yannick Kalantzis and Youssef Ulgazi

The recent rise in French inflation is temporary in nature but could last for a few more quarters. It is linked to a normalisation of prices after the lows seen in 2020, and to the increase in industrial goods and energy prices. After reaching a peak on the back of these temporary effects, inflation should come back to below the 2% mark over the course of 2022.

Chart 1: Banque de France projection for French inflation (Harmonised Index of Consumer Prices, %)
Chart 1: Banque de France projection for French inflation (Harmonised Index of Consumer Prices, %) Source: INSEE data up to the second quarter of 2021 and for the data point in the third quarter of 2021. Shaded area shows Banque de France projections. For the third quarter, only the inflation figure for July was available at the time of the projections
Updated on 10/13/2021 16:07

Pages