This paper examines the persistent upward bias in euro area households’ inflation perceptions and expectations, even when realized inflation is near the ECB’s target. It discusses behavioural and informational drivers of this bias, its implications for consumption, wage setting, and monetary policy transmission, and the challenges it poses for ECB communication and credibility. The study concludes that improved monitoring and household-oriented communication are essential.
This document was provided/prepared by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee of the European Parliament.
