The paper analyses the degree of anchoring of long-term inflation expectations derived from the ECB Survey of Professional Forecasters (SPF) using different measures proposed in the empirical literature. The objective is to assess the credibility of the ECB Governing Council's inflation aim. The anchoring of long-term expectations is a necessary condition for the effectiveness of monetary policy measures.
The analysis shows that the average level of long-term expectations has shifted downward along with the persistent fall in inflation in 2013 and 2014. Forecasters participating in the ECB's survey react asymmetrically to the release of inflation data: data below analysts' expectations lead to a decline in long-term expectations while data above analysts' expectations do not lead to a revision of long-term expectations.
Forthcoming in: European Journal of Political Economy.
