The extent to which these developments have weighed on aggregate demand is subject to controversy, however, for two main reasons. First, a large part of the fall in market-based inflation expectations can be explained by a fall in the inflation risk premium (see left chart slide 7).
Following years of persistently low inflation, investors no longer feel the need to protect themselves against high inflation. Once one corrects for the fall in the risk premium, developments in market-based and survey-based measures of inflation expectations are much more aligned (see right chart slide 7).