Economic Letter
Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve.
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Firms’ Inflation Expectations During the Pandemic-Era Surge
Ina Hajdini, Simar Malhotra, Timo Reinelt
Inflation expectations among businesses can affect how they set current prices. Firms’ expectations diverged from those of professional forecasters during the pandemic-era inflation surge and moved closer to household expectations. Analyzing firms’ survey data from 2018 to 2025 reveals three main patterns behind this shift: Businesses became more sensitive to current inflation perceptions, their longer-term expectations temporarily drifted up, and their perceptions of the Federal Reserve’s inflation goal increased. However, when inflation eventually moderated, the survey data show that firms’ inflation expectations largely returned to their characteristics from before the pandemic.
