As inflation hits an all-time high across the eurozone, the ECB is rapidly raising interest rates, fearing it will crash into expectations, perpetuating rapid price growth in a cycle difficult to break which could force it to tighten its policy even more.
These fears seem to be borne out by the study which showed that the perception of food inflation matters most and that women tend to adjust their expectations disproportionately.
“A one percentage point increase in the perception of food inflation will raise women’s short-term inflation expectations — one year of chance — by 0.40 percentage points,” the report showed. ‘tude, publishes as an ECB blog post.
“On the other hand, the impact on men’s expectations is 0.26 percentage point”, specifies the study. “In reality, the share of food, beverages and tobacco in the price index is only 21%.”
Food price inflation topped 10% in August, from levels below 2% a year ago, and was the main driver of headline inflation on a monthly basis.
Headline inflation could peak around 10% towards the end of the year and the ECB is trying to bring it down to 2%, but its projections show prices growing even higher than this target in 2024, justifying rate hikes every remaining monetary policy meeting this year.
The gender expectation gap is so large that women see headline inflation a full percentage point higher, as they tend to place more importance on perceived inflation.
This gap is particularly large in the 34 to 49 age bracket and does not appear to exist below 34, indicating that this is a target group that the ECB should address in its communication, according to the study.