Template-Type: ReDIF-Article 1.0

Author-Name: Timea Varnai
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: varnait@mnb.hu
Author-Person:

Author-Name: Aron Szakaly
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: szakalya@mnb.hu
Author-Person:

Title: Inflation and Perception: Drivers of Hungarian Households' Expectations

Abstract: This study analyses the evolution of the Hungarian households' inflation expectations
in the period between 2015 and 2025 based on household questionnaire data, using
an error correction model framework. The waves of inflation experienced in the early
2020s resulted in a change in the formation of inflation expectations. The anchoring
of expectations during the period of high inflation increased in importance:
households became more forward-looking, and the role of inflation perception in the
formation of expectations decreased. As regards instantaneous effects, it is apparent
that food price fluctuations, EUR/HUF exchange rate changes, volatility - which
reflects economic uncertainty among other factors - and households' decreasing
confidence in the economy amplified fears of inflation more than they did during the
low-inflation period of 2015–2019. The impact of inflation forecasts on households'
inflation expectations increased. Exchange rate stability became a key factor in
anchoring households' expectations. The effects and their changes, as identified
by our analyses, are robust to the highlighted socio-demographic groups as well.

Classification-JEL: D12, D84, E1, E31, E71, C83, C32
Keywords: household behaviour, inflation expectations, perceived inflation, questionnaire-based survey
Pages: 65-95
Volume: 24
Issue: 4
Year: 2025
File-URL: https://hitelintezetiszemle.mnb.hu/sw/static/file/fer-24-4-st4-varnai-szakaly.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:24:y:2025:i:4:p:65-95