More frequent ELB events cut inflation expectations – San Fran Fed

Household and businesses change spending and pricing behaviours, researchers say

san francisco fed

Households and businesses may change spending and pricing behaviours due to the expectation of more frequent encounters with the effective lower bound (ELB), says a paper published by the Federal Reserve Bank of San Francisco.

The result, the researchers say, is reinforcing lower inflation expectations in the US.

Robert Amano, Thomas Carter and Sylvain Leduc examine whether the risk of hitting the ELB has played a role in the recent below-target inflation in the US. They use a model to

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