The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations, estimating a semi-structural VAR where an expectation shock is identified...

Activity and inflation responded slowly to the Federal Reserve’s rate hikes in 2022. Was this because the transmission of monetary policy had changed? Or did other shocks offset tighter policy? We use pre-pandemic data to estimate a VAR with monetary policy shocks identified from...

The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations, estimating a semi-structural VAR where an expectation shock is identified...