How Economic Crises Affect Inflation Beliefs: Evidence from the COVID-19 Pandemic   [open pdf - 0B]

From the Abstract: "This paper studies how inflation beliefs reported in the New York Fed's Survey of Consumer Expectations have evolved since the start of the COVID-19 [coronavirus disease 2019] pandemic. We find that household inflation expectations responded slowly and mostly at the short-term horizon. In contrast, the data reveal immediate and unprecedented increases in individual inflation uncertainty and in inflation disagreement across respondents. We find evidence of a strong polarization in inflation beliefs and we show differences across demographic groups. Finally, we document a strong link, consistent with precautionary saving, between inflation uncertainty and how respondents used the stimulus checks they received as part of the 2020 CARES [Coronavirus Aid, Relief, and Economic Security] Act."