People’s expectations about future price rises affect the financial decisions they make today, such as whether to make a mortgage payment or ask for a pay raise. People’s inflation expectations can have a strong influence on these decisions.
Anchoring and framing can bias the way people perceive numbers:
- Anchoring refers to the tendency of our decisions to be influenced by the initial information we get.
Framing refers to how information is presented. The way a message is framed affects how we interpret the information and act on it.
We ran a survey experiment to assess how asking questions and framing answers in different ways affects people’s inflation expectations.
Result & Impact
Generally, there was no difference between the treatment and control groups in terms of the proportion of people whose inflation expectations were equal to or greater than 6 per cent. The exception was in the case of responses relating to five years ahead.