Uncertainty of Inflationary Perceptions and Expectations

This article reports the result of a survey designed to investigate the degree of uncertainty by which a representative sample of Swedish households hold their perceptions and expectations of inflation. The public displays hardly any uncertainty concerning the direction of change of the price level as measured by the ratio of ‘don’t know’ answers. However, when asked for numerical estimates of the perceived and expected rate of inflation, uncertainty increases considerably. The ratio of ‘don’t know’ answers is now about 45 per cent. Respondents giving numerical measures were asked to rank how certain they felt about their answers. The majority of them felt they were ‘rather certain’. A major difference in certainty was found between men and women. No major differences existed across age, place of living and education. The major conclusion of this study is that the public does not hold its inflationary perceptions and expectations with complete certainty as commonly assumed.