Similarly, the measure of longer-run inflation expectations reported in the University of Michigan Survey of Consumers has drifted down somewhat over the past few years and now stands at the lower end of the narrow range in which it has fluctuated since the late 1990s. The shifts in these measures notwithstanding, the argument that inflation expectations have actually fallen is far from conclusive.
Analysis carried out at the Fed and elsewhere suggests that the decline in market-based measures of inflation compensation has largely been driven by movements in inflation risk premiums and liquidity concerns rather than by shifts in inflation expectations.6 In addition, the longer-run measure of inflation expectations from the Michigan Survey has historically exhibited some sensitivity to fluctuations in current gasoline prices, which suggests that this measure may be an unreliable guide to movements in trend inflation under current circumstances.7 Moreover, measures of longer-run expected inflation gleaned from surveys of business and financial economists, such as those reported in the Survey of Professional Forecasters, the Blue Chip survey, and the Survey of Primary Dealers, have largely moved sideways in the past year or two.