Households are not professional forecasters This brings me to the second question as to whether similar shifts in the expected inflation outlook can be observed outside financial markets.3 One drawback of much of the empirical work on the role of inflation expectations is that it has largely assumed that all measures of expectations are interchangeable – that households and 2 / 13  BIS central bankers' speeches  firms can be assumed to have expectations akin to those of professional forecasters or financial market participants.4 In reality, reliable data on inflation expectations of consumers or firms are scarce.
I will return to firms in a minute but one reason for the lack of consumer expectations data is that several field studies have found that many people’s inflation perceptions are substantially different from actual inflation outcomes.5 For example, based on an experimental dataset maintained by the European Commission, households believed that annual euro area inflation between 2004 and 2018 was close to 9%, when in fact it was 1.6%.6 Similar gaps have been found in the United States and elsewhere.7 Moreover, many households are not aware of central banks’ inflation aims.